‘Hedging deal’ judgment given
11 July 2011 04:42 pm
Views - 11801
Sri Lanka's Ceylon Petroleum Corp (Ceypetco) owes nearly $162 million plus interest to Standard Chartered Bank for non-payment of dues linked to hedging when the oil price hit a record level and then crashed, a London court found on Monday.
A spokesman from Ceypetco, speaking on condition of anonymity, told Reuters the company was unaware of the judgment, while a spokesman for Standard Chartered Bank said: "We are happy to gain a favourable judgment."
In his judgment, High Court judge Mr Justice Hamblen concluded Standard Chartered Bank's claim succeeded of $161,733,500 plus interest following derivative transactions entered into with Ceylon Petroleum Corp.
The state oil company, which imported some 26 million barrels per year at a cost of $2 billion in 2007, needed to hedge its purchases of crude oil and refined products on the international market.
It was exposed to the record oil rally of 2008 when oil hit an all-time high above $147 a barrel for U.S. crude <CLc1> in July before crashing to less than $40 a barrel in December of that year.
Standard Chartered Bank's case was that Ceypetco had always been aware that a fall in oil prices would have made it liable to make payments to Standard Chartered.
But in a counterclaim, Ceylon Petroleum Corp said it was entitled to refuse to make the payments.
"CPC, which had no appetite to lose money, should never have been sold these products and it disputes their validity," noted the court judgment, but it dismissed Ceypetco's counterclaim.
The state-owned company entered into derivative transactions with other banks and one official at Citi Bank, speaking on condition of anonymity, said the ruling could mean other banks would also be entitled to payments. Reuters