SGX goes after Swiber in potential rule breach

SINGAPORE - The Singapore Exchange (SGX) is going after Swiber Holdings for potential breaches to the exchange's Rule 703 pertaining to disclosure of material information.

In the letter obtained by The Business Times relating to the potential breaches, SGX made reference to Swiber Holdings' disclosure lapses on the US$710 million (S$963 million) West Africa project first announced in late 2014 and two separate litigation claims by Likpin International Ltd and Greene Energy Group Asia Pacific Pte Ltd.

SGX said citing disclosure lapses on the US$710 million project, Swiber has potentially breached paragraph 25 of Appendix 7.1 to Rule 703.

Paragraph 25 of Appendix 7.1 deals with, among others, three key points - that the contents of a press release or other public announcement is as important as its timing and that the announcement should avoid omission of important unfavourable facts as well as presentation of favourable possibilities as certain or as more probable than is actually the case.

SGX in its letter alluded to the fact that since Swiber's first SGX filing on Dec 15, 2014, for the US$710 million project, the listed group in addition to an observed lapse in disclosing a delay in the project execution, did not proactively identify the client nor flag any pre-conditions tied to the project.

The project, as disclosed in Swiber's SGX filing on July 8 in its response to a private query from SGX, has been deferred indefinitely due to a weakness in the oil and gas sector.

The listed group in its second response to an SGX query on July 29, acknowledged that the award from RoyalGate Energy is a letter of intent that still needs to be formalised as a contract in due course. This confirmed BT's report on July 9, which pointed out that Equatorial Guinea-based RoyalGate has signed on Swiber for a project tied to Block Z field development off the West African country.

In its Aug 12 response to a third SGX subsequent query for an update, Swiber further clarified that no contract has yet to be entered into between the listed group's subsidiary, Swiber Offshore Construction and the end client. The listed group added the contract award has been held back due to a delay in an appraisal drilling that is a pre-requisite for front-end engineering and design studies to commence. It blamed the delayed drilling on a persistent weakness in the O&G sector.

SGX, in taking in Swiber's responses, has however, noted disclosure lapses on the listed group's order book.

"The company did not inform its shareholders and the investing public about the delay in the US$710 million project during a prolonged period from Dec 15 2014 to July 8 2016," SGX wrote.

In addition, the US$710 million project was accounted for "in all (Swiber's) disclosures on the group's order book without any qualification that the contract has yet to be signed or the project has been delayed", the regulator added.

On Dec 15, 2014, Swiber laid claims with the alleged US$710 million project award, it had clinched contracts totalling US$1.03 billion. BT also understood following Swiber's dramatic reversal from its now aborted winding-up petition, the interim judicial managers of the distressed group has included the US$710 million LOI in the US$1.67 billion secured projects tabled under a report filed with the High Court for the judicial management application.

SGX in invoking Paragraph 8 of Appendix 7.1 to Rule 703 also noted Swiber has not made any announcement on material litigation claims by Likpin and Greene Energy amounting to S$10.7 million and S$9.6 million, respectively.

The exchange viewed these litigation claims as significant taking into account Swiber's profits recorded for the financial year 2014 and for the first quarter ended March 31, 2015. Swiber posted a net loss of US$2.5 million for Q1 FY2015 and a net profit of US$21.7 million for FY2014.

Swiber in its July 12 response to a private query from SGX argued that both litigation suits were not material based on calculations against the group's revenue, total assets and net tangible assets at the relevant time. "In addition, the group's external lawyers were of the view that the claim for the Likpin suit was unmeritorious," it added.

It provided updates to the suits in its response to SGX, in support for non-disclosure:

Greene Energy has filed a notice of discontinuance dated Nov 20, 2015, to the suit because the dispute was resolved via mediation and the case was settled for US$3.6 million. Likpin's claim in its suit was struck out by the High Court on Oct 1, 2015, and although the appeal was scheduled to be heard between July 25, 2016 and Aug 1, 2016, Swiber's external lawyers are confident of succeeding in resisting the appeal. The SGX letter dated Aug 16 was addressed to Swiber's board of directors before its July 28 winding-up petition. They are Raymond Goh, Francis Wong, Darren Yeo, Nitish Gupta, Jean Pers, Leonard Tay, Yeo Jeu Nam, Chia Fook Eng and Oon Thian Seng.

Mr Wong and Mr Gupta have resigned from the board of the listed group as vice-chairman and executive director, but continue to remain as directors of certain subsidiaries of the company. Swiber retracted its erroneous July 28 announcement on Mr Tay's resignation and said he remains on board as the group chief financial officer.

SGX invited the named parties to make their representations within 14 days from Aug 16 to the alleged breaches of Rule 703 or run the risk of the exchange making findings against their interest.

This article was first published on September 13, 2016.
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