Singapore: Singapore-listed Chinese shipbuilder JES International Holdings announced that it has received an email notification from Lyceum Partners LLC’s legal counsel alleging that the company has committed a default under a loan & maintenance agreement by failing to make due payment of maintenance fee.
JES entered into the loan & maintenance agreement the Lyceum Partners in August 2013 for a $20m facility with the option to request for an additional $20m.
According to JES, it entered into a master repurchase agreement (MRA) with Lyceum Partners in August 2013, and Lyceum Partners sent a notice to the company on May 22 informing that an event of default had occurred under the MRA as the fair market value of the shares purchased under the MRA was less than 80% of the purchase price, and in accordance with the terms agreed the MRA was terminated.
JES believes that there is no default under the agreement, and said it had failed address the share valuation in the required time period because it did not realize that the notice was sent by Lyceum Partners until the expiration of the said time period.
“The facility provided to the company was funded by the MRA; accordingly, the agreement and the MRA are part of a series of transactions regarding the facility. As such, once the MRA is terminated, the company may not request for any further drawdown on the facility since no further shares could be purchased under the MRA. With the termination of the MRA, the Agreement is no longer subsisting. As such, the lender should therefore not be entitled to make any further claims under the agreement, including but not limited to the maintenance fee,” JES said in the announcement.
JES said it is seeking legal advice on the dispute. [02/07/14]