Otto Marine : Company Update

(Company Registration Number 197902647M)

(Incorporated with limited liability in the Republic of Singapore on 5 September 1979)

Otto Marine Limited (the "Company") wishes to announce that its wholly owned subsidiary, Otto Ventures Pte Ltd ("OVPL") had earlier entered into a term sheet (the "Term Sheet") with two other parties (the "Claimants") on 3 September 2014 pertaining to the acquisition and operation of two offshore vessels (the "Vessels"). The Claimants are a holding company (the "Hold Co") and its wholly owned subsidiary.
The Claimants have commenced arbitration proceedings pursuant to the arbitration rules of the Singapore International Arbitration Centre (the "Arbitration") against OVPL where the Claimants are claiming losses of approximately US$8.88 million caused by OVPL's alleged breach of the Term Sheet being OVPL's refusal to co-operate fully in securing the requisite financing for the Vessels (the "Claim"). The first procedural meeting of the Arbitration was held on 4 May 2015, to decide and agree on the timelines for all documents to be submitted in the Arbitration.
The Claimants had earlier, contrary to the Term Sheet which included an arbitration clause, issued a Writ of Summons (the "Suit") against OVPL for the Claim as well. OVPL applied successfully to the Court for legal proceedings in the Suit to be stayed in favour of the Arbitration.
Separately, OVPL had also loaned US$650,000 (the "Loan") to the Hold Co pursuant to a loan agreement (the "Loan Agreement") on 3 September 2014. It is a provision in the Loan Agreement that the Loan is payable by or on 20 December 2014 (the "Maturity Date") should the Vessels (for whatever reasons) not be transferred to a joint venture company (to be formed) at or before the Maturity Date. To secure the Loan, each of the shareholders and directors of the Hold Co (the "Guarantors") gave a joint and several personal guarantee to OVPL, as well as charged their shares in the Hold Co to OVPL. The Hold Co has so far not repaid the Loan.
OVPL subsequently informed the Claimants of its intentions to terminate the Term Sheet in accordance with its terms on the basis of (a) the Claimants' failure to ensure that the Vessels were delivered within the contractually stipulated time, and (b) the joint venture company's (yet to be formed) failure to obtain financing.
OVPL has issued letters of demand against the Hold Co by demanding repayment of the Loan in accordance with the terms of the Loan Agreement. OVPL has also issued statutory demands to the Guarantors to repay the Loan pursuant to the personal guarantees. The Guarantors managed to set aside the statutory demands on the grounds that there were triable issues to be determined at the Arbitration, such that the Guarantors do not need to repay the Loan immediately. Notwithstanding this, OVPL's claim against the Guarantors pursuant to the personal guarantees still subsists. OVPL's claim against the Hold Co under the Loan Agreement also still subsists and remains valid.
The Company has been advised by its lawyers that (a) the Claim is vexatious, (b) the likelihood of the entire amount of the Claim being successful is low, (c) the Claimants cannot justify or meaningfully quantify the full amount of the Claim, and (d) the Company has more than an even chance of successfully defending the Arbitration.
The Company plans to vigorously defend itself against the Claim and is currently seeking further legal advice on the counter-claims that it may file in the Arbitration and the various causes of action it may have against the Claimants and the Guarantors.
The Company will make such further announcements as and when material developments in the present matter arise.
The Company has taken all reasonable care to ensure that the facts stated in this announcement are fair and accurate in all material aspects as at the date hereof and that no material facts have been omitted from this announcement.

Chong Sieh Jiuan
Chief Financial Officer and Joint Company Secretary
7 May 2015

distributed by