The terms of the settlement provide that a total of UK GBP 108 million, out of which UK GBP 16.9 million has already been paid as interim damages and costs, shall be paid to the Consortium. The balance is to be paid in three equal annual installments of UK GBP 30.4 million, with the first installment due on January 30, 2004 and the remaining two due on December 9, 2004 and 2005, respectively. Interest will accrue on the second and third installments at the rate of 100 basis points over Libor.
As a result of the settlement, Tenaris will record a loss, net of its US$76.4 million provision, of approximately US$76 million post-tax (approximately US$108 million pre-tax). Because the pipe that was the subject of the litigation was manufactured and sold, and the tort alleged by the Consortium took place prior to the privatization of Dalmine in 1996, an arbitration proceeding against Fintecna SpA, an entity owned by the Italian government and successor to the government-owned seller, ILVA SpA, has been brought seeking to compel Fintecna to indemnify for amounts paid or payable to the Consortium. This arbitration proceeding is currently in progress and is expected to be concluded in the first half of 2004. Based on legal advice, Tenaris believes that the arbitration proceedings will be resolved in its favor and that Fintecna will be required to reimburse a substantial proportion of the amounts paid and payable to the Consortium. No assurances, however, can be given that the arbitration proceedings will, in fact, conclude in the first half of 2004 or that Fintecna will be required to reimburse any amounts paid or payable to the Consortium.
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