Wharf posts US$173m bond in US
ANDREW CHETHAM and agencies in Denver
Wharf Holdings has posted a US$173.5 million bond with two United States institutions - a move that should clear the way to reversing a court order barring the company from transactions with US banks and brokerages.
It is the latest twist in Wharf's long-running legal battle with Denver-based United International Holdings and its failure to pay the company $150 million in damages awarded last year.
The bond, lodged with the National Union Fire Insurance Co and American Home Assurance Co, will be used to pay the damages and interest accrued if Wharf's appeal against the ruling fails.
It also means that other legal attempts by United International to get hold of the cash from Wharf must be put on hold until the appeal result, which could take several months.
Wharf executives were not available yesterday to explain why Wharf had decided to pay the bond.
However, it seems that, in agreeing to put up the $173.5 million, Wharf has capitulated to pressure being applied by the US court system.
Early last month, Wharf was found to be in contempt by a Denver court for failing to turn over assets held outside the US as security for the damages.
It also ruled that Wharf should pay double the amount of interest being levied to the outstanding payment.
Later in the month, again in Denver, the court turned up the heat on Wharf by barring the company from carrying out dealings with US banks and brokerages.
This stopped the company from engaging in a wide range of activities and, perhaps most importantly, cut its US lines of credit.
Particularly mentioned in the court ruling was a $5.2 billion general working capital credit facility with Chase Manhattan bank.
Now that Wharf has posted the bond, under the terms of the December judgment, it should be able to be relieved from that part of the order.
Wharf's battle with United International revolves around a 1992 verbal agreement that the US company said it had made with Wharf, allowing United to buy 10 per cent of Wharf's cable operation in Hong Kong.
The action resulted in last May's court ruling in United's favour and the awarding of $150 million damages against Wharf.
Commenting on the posting of the bond, United International said the move postponed its attempt to collect the damages owed by Wharf.
All proceedings to collect the payment have to be put on hold until the US Court of Appeals for the Tenth Circuit passes a judgment on the case, it said.
Wharf's reason for its unwillingness to settle the damages was that a payment would compromise its right to appeal against the ruling.
'We have no alternative to decline compliance if we are to preserve our right of appeal,' a spokesman said last December.