By John Geddie
SINGAPORE (Reuters) - Singapore oil rig builder Keppel Corp's agreement to pay a $422 million (£315.8 million) fine to resolve charges that it bribed Brazilian officials, including people at state-owned oil company Petrobras, sent its shares tumbling and also triggered a decline in the stock price of smaller rival Sembcorp Marine on Tuesday.
In the deal announced by the U.S. Justice Department on Friday, Keppel Offshore & Marine Ltd agreed to pay the combined penalty to resolve investigations by authorities in the United States, Brazil and Singapore.
The company entered into a deferred prosecution agreement while a U.S. subsidiary, Keppel Offshore & Marine USA Inc, pleaded guilty in federal court in Brooklyn to conspiring to violate the U.S. Foreign Corrupt Practices Act. The case is part of Brazil's largest-ever corruption case, "Operation Car Wash", that has engulfed both the corporate and political worlds in the country in the past few years.
The market's attention in Singapore turned to Sembcorp because in plea testimony first made public in Brazil in March 2015, a former Petrobras executive said that a representative of Sembcorp's Jurong Aracruz shipyard was involved in bribe payments.
It is unclear whether Sembcorp is facing a probe by the authorities in the U.S., Brazil and Singapore.
Asked if it was investigating Sembcorp Marine, Singapore's Corrupt Practices Investigation Bureau said it does not comment on the existence or otherwise of other investigations.
A spokesperson for Sembcorp Marine, said: "We do not comment on news reported by the market or media. As with our usual practice, in all matters relating to our company, we will make the necessary announcements as and when required."
In a statement in February 2015, Sembcorp Marine said it did not make any illegal payment, noting that the company's policies and contracts prohibit bribery and unethical behaviour. After the plea testimony became public the following month, it said that it is "unable to comment on the truth or otherwise of these allegations", and that internal investigations were continuing.
DOWNGRADED TO "SELL"
"The market is likely to also focus on whether SMM (Sembcorp Marine) will face a similar penalty," OCBC Investment Research said in a report on Tuesday.
Shares of Keppel (SI:KPLM) and Sembcorp Marine (SI:SCMN) both initially slid more than 3 percent on Tuesday, though Keppel’s recovered partially to end 2.4 percent down. Sembcorp finished the day with a loss of 3.6 percent.
OCBC maintained its "buy" rating on Keppel while downgrading Sembcorp Marine's rating to a "sell".
"Investors are just basically positioning themselves in the event that something like this may happen to them (Sembcorp)," said UOB Kay Hian analyst Foo Zhiwei.
Analysts are optimistic that Keppel can cope with the fine, which the firm said on Saturday would be a "one-off" and would be provided for in the current financial year.
"While the stock could be under pressure in the near term, we see this resolution as removing a key overhang on the stock," Nomura analyst Abhishek Nigam said in a report, adding that its fundamentals, especially in offshore and marine, continue to improve aided by higher oil prices. Nomura maintained its buy recommendation on the stock.