Interesting reading the latest FRR submission. I personally think FRR lawyers have presented a strong case for the preliminary injunction to be granted, supported by many relevant cited/reference cases, which should make it relatively easy for the Judge to make a decision. But we also know that Judges are fickle/moody creatures, depending on which side of the bed they got out of.
Anyway, still no sign of a smoking gun but nevertheless, I think FRR has a good case for the breach in the fiduciary duties. In the latest submission, FRR highlights that Hope has openly admitted that he was conflicted and his first priority was Outrider and not to his Company or its stakeholders. I wonder if he will repeat these admissions under oath and in front of a Jury? What’s the penalty for lying in Cali?
Also, many People are saying that we have defaulted on a debt and all Hope is doing is collecting his debt. Well, that is true and it’s indisputable. Also, it makes no difference how much Hope paid to acquire these distressed CLNs - FRR owe the par value of the notes. Trading in the distressed debt market is a trillion dollar business and you can’t argue on the debt contract, although you could try to negotiate with the debt holder.
So what came first? Debt default or breach in fiduciary duties; a bit like the eternal unanswerable question, did the chicken come first or the egg? Anyway, the default wouldn’t have occurred if Hope had sided with the other Directors and approved the two lending proposals because that would have allowed continued operations (and payment to the creditors), besides there was no other options available at the time. We have said many times that Hope (as FRR BoD) should have approved the lending propositions but declined them at the OMF end and he would have been well within his right. I also recently posted an excerpt from the MOIL case, where there was a specific provision in relation to Outrider Director and Conflict of Interest/fiduciary duty, so he knew what he was doing when he came on to the Board (in Feb 2017).
So the question remains, will the Judge accept FRR’s version that Hope openly admitted that he didn’t give a hoot about FRR despite being its Company Director? Openly admits that his first priority was to Outrider and not all the Company’s creditors/stakeholders? Or confirmation that his intention (and Outriders business model) was always to takeover the company for the sole benefit of himself and Outrider? Well, his actions since the cessation of Cayman Island proceedings, confirms yes!
So back to the core question (no, not about the egg & chicken although that still deserves more pondering), did the Fiduciary breach lead to the debt default? If the answer is yes, then you might be ok, otherwise, Nicandros may have deliberately initiated a high risk ‘Mexican Standoff’ with Hope without knowing who is the quickest to draw. Let’s pray is Clint Eastwood vs. Jr Ewing.
Feeling nervous, let’s pray there is a backstop from the much famed $150m loan although I give this no more than a 10% chance right now.