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 it bribed Brazilian officials, including people at state-owned oil company Petrobras, sent its shares tumbling and triggered a decline in smaller rival Sembcorp Marine Ltd on Tuesday.
In the deal announced by the U.S. Justice Department on Friday, Keppel Offshore & Marine Ltd agreed to pay a combined penalty to resolve investigations by authorities in the United States, Brazil and Singapore.
The company entered into a deferred prosecution agreement while 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 past few years.
Market attention in Singapore turned to Sembcorp because in plea testimony made public in Brazil in March 2015, a former Petrobras executive said a representative of Sembcorp's Jurong Aracruz shipyard was involved in bribe payments.
It was unclear whether Sembcorp faced a probe by authorities in the United States, 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 any investigations.
The U.S. Justice Department also said it neither confirms nor denies the existence of an investigation.
A Sembcorp representative 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 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, the company said it was "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 (KPLM.SI) and Sembcorp Marine (SCMN.SI) both initially slid more than 3 percent on Tuesday, though Keppel recovered partially to end down 2.4 percent. Sembcorp dropped 3.6 percent.
OCBC maintained a "buy" rating on Keppel and downgraded Sembcorp to "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 were optimistic that Keppel can cope with the fine, which the firm said on Saturday would be a "one-off" and 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. The company's fundamentals, especially in offshore and marine, continued to improve, aided by higher oil prices, the analyst said. Nomura maintained its "buy" recommendation.
(Reporting by John Geddie; Additional reporting by Nate Raymond in Boston; Editing by Muralikumar Anantharaman, Martin Howell and Jeffrey Benkoe)