CSE Global share price is down after it announced that it is suing a customer in the US for drawing on a counter standby letter of guarantee of some $6 million.
As at 9.18 am, CSE Global shares changed hands at 43.5 cents, down 5.43% from the previous close.
According to CSE Global, its subsidiary W-Industries was the sub-contractor of this customer, the main contractor for a construction project.
In connection with the project, CSE Global and W-Industries jointly applied for a counter standby letter of guarantee from a bank (SBLC) issued in favour of the customer as the beneficiary.
The SBLC can be drawn only to repay the customer for amounts due, owing and unpaid from W-Industries to the customer under the subcontract between W-Industries and the customer.
According to CSE Global, the customer called on the SBLC and the bank made a payment of US$6 million to the customer on Dec 20.
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"The company and the board are of the view that the call on the SBLC by the customer was frivolous and without merit," says CSE Global.
"The company has sought legal advice and intends to commence legal proceedings against the customer to recover the amount paid to the customer under the SBLC."
"The company will take all steps necessary to preserve its rights and intends to pursue the claims against the customer vigorously," adds CSE Global.
The company warns that if it does not succeed in the legal proceedings or is unable to recover the full amount paid to the customer by the bank under the SBLC, there may be an impact on its financial performance for the current financial year ending Dec 31 which it could not quantify for now.
