Court Orders Payment Freeze on Swiber's Bank Guarantee for Indian Projects

Swiber Holdings Ltd., currently under interim judicial management after running into financial difficulties, disclosed Monday that India's state-owned Oil and Natural Gas Corp. Ltd. (ONGC) has called on bank guarantees for contracts linked to several of its field development projects that were awarded to the Singapore-based offshore oil and gas construction and support services provider.

"ONGC has called on several bank guarantees which were issued for the Daman Development Project, the Pipeline Replacement Project-4, the Subsea Pipeline Project for B-193 Field Development Project, the MHNRD-II Pipelines and Platform Modifications Project and the C-26 Cluster Pipeline Project, of which Swiber Offshore Construction Pte. Ltd. (SOC), a wholly owned subsidiary of the Company, was involved in either solely or as a consortium partner," the company said in the press release.

According to Swiber, the bank guarantees amounted to approximately $94.48 million. Two bank guarantees amounting to around $9.73 million (INR 644.2 million) have also been called upon, including one for around $4.64 million (INR 307.5 million), which has been paid out by the relevant bank.

In addition, the firm revealed that Punj Lloyd Ltd. has called on a $1.475 million bank guarantee provided for the WO16 Cluster Project and SB-14 Pipeline Project, with the amount already paid out by the bank.

SOC has written to notify ONGC and Punj Lloyd that their calls on the aforesaid bank guarantees were wrongfully made.

The court in India has granted an interim order Aug. 4 instructing the banks to hold back on any payment of the bank guarantees until Aug. 11, when Swiber's applications for injunctions will be heard. SOC is also in discussions with lawyers on the potential steps that may be taken to preserve its rights in relation to the bank guarantees -- which it furnished last year after bagging the ONGC contracts -- that have been paid out.

In a related development, Indian daily The Economic Times reported Tuesday that Swiber had argued in the local high court that it is capable of fulfilling the contractual obligations to ONGC. As such, the invocation of the bank guarantee would have a negative impact on the contractor.

Swiber further assured the Indian court that the company would obtain suitable court orders from the Singapore Court to ensure that ONGC's projects are not affected.