Kingspan said yesterday that a US court had upheld the award of more than $40 million (€32.6 million) in compensation to the company over irregularities relating to its purchase of the Tate flooring business four years ago.
The US District Court confirmed an arbitration award of $40.1 million to Kingspan but reduced the amount of interest accruing to the Cavan-based company for delayed payment.
However, the judgment has been appealed to the US Third Circuit Court by Tate's founder and chairman, Mr Daniel Baker, and other sellers of Tate. However, the Tate sellers must provide a bond for the full amount plus interest, which significantly reduces the credit risk for Kingspan if it wins the next appeal.
The Cavan-based company bought Tate, a raised access flooring business, for $120 million at the end of 2000 but quickly discovered that warranties given by the former owners in relation to orders that were in the pipeline never materialised.
It went to arbitration and was awarded $40.1 million last October as well as interest of $5,354.79 by the arbitrators for every day the award was not paid, backdated to September 19th.
However, last November Mr Baker and other sellers of Tate filed an appeal in Pennsylvania against the outcome of the binding arbitration. While the substance of the ruling was not at issue, the appeal focused on the compensation awarded.
The district court ruling confirmed the $40.1 million award but reduced the rate of interest accruing on a daily basis from the state of Pennsylvania rate of 6 per cent to a Federal rate of 2 per cent. Going forward, interest will accrue at a daily rate of $2,241 per day compared to the previous rate of $5,355 per day.
The court also calculated the amount of interest owed for the period from October 2003, when the arbitrators ruled, to July 14th was around $600,000. It awarded Kingspan a total of $40.7 million, made up of the basic compensation payment and the interest accruing until July 14th.
Analysts welcomed yesterday's announcement, noting the total award to Kingspan was worth around 20 cents per share.
"While this judgment has again been appealed, this is the second decision found in Kingspan's favour, thus reinforcing the strong case the company has against Dan Baker," Goodbody Stockbrokers said.
Company broker Davy also noted that the award, if it is eventually received, would further strengthen Kingspan's balance sheet, pushing its net debt well below €100 million and lowering gearing to around 25 per cent.
Kingspan has yet to factor the payment into its accounts. Shares in Kingspan closed four cents lower at €4.80 yesterday in a generally weaker market.
