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What took some observers by surprise, however, was why the SG payment was even made at all, given the tough stand the rig- builder took at a press conference two weeks ago. It stated then that it was not liable for the losses. Chief financial officer Tan Cheng Tut even told analysts and the media that the US$83 million already paid would be reported as a 'recoverable' item in SembMarine's results in the fourth quarter. SembMarine said yesterday the US$115.45 million payment 'was a precondition set by SG for the closing out of its transactions with Jurong Shipyard'. SembMarine emphasised that 'SG accepts that such payment is without prejudice to Jurong Shipyard's position that the transactions are unauthorised and subject to the firm's right to a refund in the event that the dispute is ultimately resolved in its favour'. Yet, the SG payment does raise concerns among investors that the payment may have weakened Semb-Marine's case. Some argued that it was surely the banks' responsibility to close the outstanding positions after learning from SembMarine that there were unauthorised trades made by the firm's then finance chief, Mr Wee Sing Guan. If the trades were 'rogue transactions' done without SembMarine approval, on what grounds did the banks impose preconditions on the rig-builder for closing them? Others argued that SembMarine would have been under intense pressure to close them, as recent weeks had been an unsettling time for US dollars and euros. Between Oct 22 and Nov 1, losses on SembMarine's forex contracts ballooned from US$165 million to US$220 million, as the euro rose from US$1.4209 to US$1.4424. Had SembMarine not closed the positions, the losses would have been greater, as the euro strengthened further to a record high of US$1.4707 eight days later. Yet, to incur such huge losses would have required Mr Wee to place bets worth billions of dollars. Traders pointed to disclosures made last week by Labroy Marine, which incurred similarly large forex losses. As at end-September, Labroy had entered into 'buy' options worth $3.2 billion and 'sell' options for $5.27 billion on US dollars and euros. These resulted in a realised gain of $37 million and an unrealised loss of $206.5 million. Given the huge size of the SembMarine trades, debate would surely continue over whether other members of the firm's management were aware of the transactions. One analyst's claim that some had required two signatories failed to elicit any response from the firm at the recent press conference. One thing is certain, though. Other banks, having seen SG collect US$115.45 million, will be certain to press SembMarine for payment. It may turn out to be a nail-biting time for investors, as they watch SembMarine's efforts to recover the money from the banks.
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