A JOINT-VENTURE (JV) partner of Yongnam Holdings has exercised its rights to terminate a deed tied to a S$553.8 million tunnel-and-infrastructure contract with the Land Transport Authority (LTA).

Yongnam was placed under judicial management on Aug 14.

Its subsidiary Yongnam Engineering & Construction (YEC) had signed the deed with Leighton Contractors (Asia) on Nov 27, 2017 with the intention to perform works together for a portion of LTA’s North-South Corridor project known as N103.

The North-South Corridor is a 21.5 km transport corridor stretching from Admiralty to Rochor that is expected to be completed in phases from 2027.

In a bourse filing on Thursday (Dec 21), Yongnam’s judicial managers said that the termination of the deed came as YEC said in an Oct 16 letter that it was not in a position to pay S$1.5 million towards the JV.

The S$1.5 million was proportionate to its 30 per cent interest in the JV. The JV had required S$5 million within 21 days from Oct 6.

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With that, Leighton issued a letter dated Nov 24 stating that it was exercising its rights to terminate the JV deed on the basis that YEC was in breach of the deed for non-compliance with the payment direction.

There was also the basis that YEC had committed an insolvency event since it was placed under judicial management, the managers noted.

The managers, meanwhile, updated that YEC has entered into a novation agreement with Leighton and LTA with respect to the project. 

This means that LTA will release and discharge YEC from the performance of the project and from all claims, demands, obligations and liabilities arising out of or in connection with the project.

Trading of Yongnam’s shares, frozen at S$0.026 apiece, remains under suspension.