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lse:frr

#21

Hi Fozzer - I thought the requirement was for the parties to submit final responses in February - then the court decides - and no timeline given. However I might have missed something here

Re the arguments I would be pretty sure that a part of the FRR argument would be the conduct of key state representatives and their corrupt behaviour. This was critical in 2017 - and SN even referred to it at the AC. Through my contacts I know this was a big issue - and of course US anti-bribery legislation is very demanding. I know the Nomad was insistent that FRR would not resort to brown envelopes - and you can be 100% certain that this information was shared with Ted Poe and Co - leading to the US authorities giving the yellow card back in 2018

Can’t believe that FRR would not be playing this card in the Arbitration - and this might be part of the reason for the Georgians playing the PR button.

Just speculation - but would be pretty confident it is right


#22

Thanks Devex, i think those articles i posted links to should be viewed with caution. In fact I’m going to delete the link. Whomever is writing the articles are no friend of Frontera.

I hope it is Feb as another 6 months would be torture!!!

ATB


#23

Bugsy on LSE Fozz.

https://factcheck.ge/en/page/persons/beka-natsvlishvili


#24

The Texan court hearing taking place behind closed doors next week continues to intrigue. If Zaza &SN don’t have any ‘dirt’ on Hope, then what could be the reason? Perhaps the reason could be that a farmout has been agreed with a super major but is subject to securing a 25-yr production agreement which is going through the tribunal (and subject to NDA). Perhaps they will ask the judge to provide an extension for the repayment as they are expecting some money in from either the farmout or new financing. If this argument is put forward, most likely it will fail as Hope is exercising the call-up on guarantees as the obligor is in administration. May be the Judge will be sympathetic and grant an extension as third party g’tees are normally seen a little unfair/harsh on the providers, but we’ll see.


#25

I’m not sure Frontera has any dirt on Hope otherwise Frontera would pursue the Cali court case with ferver and zeal.

Much more likely that Zaza and Steve will spill the beans on a “deal” of sorts with Hope. That deal could be anything though, with BP, with Hope with the GOGC. God knows!!! It also could just be as simple as they want to keep the embarrassment of the whole thing out of public sight.


#26

Oopsi LSE 15:25
Has Levan’s CV has been updated? - last time I can only recall him mentioning two arbitrations. He now references a third which is the current dispute. It confirms that the arbitration has happened.

Third case involved complex dispute between investor and host state government arising out of energy-related host government agreement, adjudicated by an ad-hoc tribunal of three arbitrators, under the United Nations Commission on International Trade Law (UNCITRAL) rules, venue - Stockholm, Sweden

giac.ge/wp-content/uploads/2019/10/Levan-Bakhutashvili-Esq.-MCIArb-GIAC.pdf


#27

Interesting - its in the past tense too, so does that imply arbitration is completed? And if so, he has recorded the fact he took part on his CV, therefore suggests the outcome was favourable to him.


#28

Zaza stated in that obscure Georgian news article [on unpaid workers], that ‘crisis period’ was until end of January. This month could be a ‘decider’ in many respects, but particularly relating to the Arbitration hearing. No resolution there, things will start to unravel very quickly [noting the multiple legal cases going on - they will run out of steam and money]. So, with my ‘glass-half full’ cap on, I think that with the right US-political support/pressure, Georgian Govt will begrudgingly agree to a deal of some kind. I cannot see they guys sitting on the other side of the pond allowing a US company [that has invested US$400M] to be robbed easily. FRR may also be seen as a ‘vessel’ to bring energy independence to other former-soviet states such as Moldova & Ukraine. Anyway here is that important news snippet with Zaza’s comments:

“As Zaza Mamulashvili, CEO of the company said, there is progress in the dispute over the company with the government. According to him, virtually all issues are resolved positively, except for one related to the contract between the state and the company. The company has a contract until 2027, the company promises to extend the contract after 2027, otherwise the well will be useless and there will be no time left for the investor to return the investment. He said that after discussing the issue and negotiating with the state it will be possible to sign an agreement with investment banks and conclude a new financing agreement. This will automatically result in the company continuing to operate in the old fashion and delivering employee salaries over time (the exact timing is still unknown!). The crisis period, he said, is until the end of January 2020, after which positive changes are expected both in relations with the state, as well as with investment banks and the company. (The exact time is also unknown here!)”


#29

Where does that leave the shareholders?


#30

THAT is the million $ question


#31

Plenty of banter over on the LSE, its been said before but Steve and Zaza must think this is retrievable otherwise they’d have thrown in the towel. There’s still some hope for shareholders.

Good luck all.


#32

Yep - the LSE banter has been entertaining. Our friend brmg69 must be on a day off and good to see R8 piling in as well - all prompted by a certain poster re-emerging. I am always amazed when the antagonists devote such an inordinate amount of time in putting out information or a view on this share - knowing that none of us do s*d all about it.

Anyway amongst the banter another informed comment from our resident legal eagle - Oopsi…

"Thank you very much for posting this. It is very much appreciated. Without your time and commitment (especially as you are unable to copy and paste many of the recent documents) we would not be furnished with key information and developments, so thank you.

The amended case management order is interesting. Case management hearings are a mechanism (in England & Wales at least) introduced so judges could actively manage cases, hold parties to account and for judges to take hold of a dispute to ensure the proper administration of justice. Two points. Firstly, from recollection, I seem to recall that the previous agreed joint case management order did not make provision for mediation as OMF (for obvious reasons) opposed it. Note that Judge Seeborg has now ordered this and uses the word “will” – that is mandatory (albeit only to seek to engage). That is a step forward. Reading between the lines, I think the Judge (similar to Kawaley) has taken the view that this matter is capable of resolution and it is best for all concerned that this matter is resolved away from the court process. Whether OMF take that view is an entirely different story. Secondly, there is now a direction for the parties to amend the pleadings. This could be because FRR want to make a new claim/retract a claim/amend an existing claim. With new Counsel on board, they may have a different approach, see things in a different light and need to make sure the pleadings reflect this. Amendments may impact on the tactical approach taken by FRR and designed to add pressure to OMF.

As others have mentioned, this and the Texas dispute are unlikely to have a material impact on the immediate investment required by FRR. The Californian dispute is being driven by us and can be dropped. The Texas case involves individuals and not the company. The Arbitral dispute is, however, critical. If FRR are successful, that deals with that particular legal issue. If unsuccessful, I can see the matter dragging on unfortunately. Frontera have already raised an objection to the arbitration in terms of the correct parties to the dispute and the arbitral tribunal have chosen to split the issues, dealing with the main legal issue of breach first. If the Georgian Government are successful, expect a further arbitration issue on the secondary point or Frontera to appeal/prevent enforcement. The preferred alternative is for a resolution."


#33

Yup seems to have kicked off again over on the LSE BB as the shorters get on the front foot today. I just don’t get their incessant negative posting and ‘talking down’ to people who are clinging on to any ray of hope. I will admit that the odds are still stacked against us, yet our guys continue to put up a good fight; this is enough for me to keep looking at this situation as ‘glass half full’.

The recent update on the Cali case (as interpreted by oopsi) is also positive in the sense that the Judge is guiding the parties to mediation. Nevertheless, the trial date in now set for next year - 21/01/2021. Had Hope just shown more patience, the CLNs were due for repayment in November 2020 when he would have been in a very strong position by not agreeing to extend/restructure the CLNs. But he just seemed eager to call a default and take over the company rather than working with the mgt. Maybe he was aware of the discussions with the super major and that stroked his greed? Having said that, SN and Zaza really messed up by agreeing to those ‘penal’ terms but I think they had very little option. Against this, I will say the fact that both Zaza and SN converted their debt in to ordinary shares at a big premium of 1p and also gave their personal guarantees secured by their shares, kinda proves their genuine intentions to us and the company.

Now that the Fid case is kicked in to long grass, the next bit of legal news could be on the Texas case, followed up by the Arbitration. I wonder what they will disclose of that hearing. On the liquidation of FRCC, seems this will also be approved in NY, which means that the Liquidator may look to call on the FRI corporate guarantee but that is surely after they have established that the 5% of the PSA assigned to FRCC was either worthless or could not find a buyer.

Just thinking out loud…


#34

Remember the CLNs were issued by FRCC secured by a corporate g’tee from Frontera Resources International (FRI). CLNs were not issued by FRI, but guaranteed; it is FRCC that is being liquidated as the primary obligor not FRI. FRCC owns the main operating company in Georgia (FEGL) and the PSA was awarded to FEGL. According to some unverified information, the PSA was 95% farmed out to FRUS, leaving 5% of future royalties to service the CLN debt. This may turn out to be master stroke as FIC will argue that it will only pay under the CG after there has been an exhaustive sale process of the 5%. If nothing else it will add considerable more time and money in the legal process for Hope, if they go down the FIC route.

So, what is the value of 5% of B12? Well, difficult to answer as apparently the Georgian Govt wants 99% of the acreage back (subject to ongoing arbitration). Notwithstanding this variable, recall WHI valuation of Taribani field was c.$435M for three zones in Eldari A. We know from the completion of T-39 well, it opened up Eldari B which was considered more prospective. Also we are non-the-wiser on the current production.

Final but a very important legal consideration (and this is for the shorters), under company law, once a company enters liquidation, interest payable on debt ceases immediately. So by rushing to put FRCC in to receivership, Hope scored a spectacular own goal by crystallising the debt (@$30M?) because the higher coupon rate never kicked in. And FRR saved 2years of interest.

Not a legal guy but know enough to get me by (or in trouble).


#35

Thanks Seymour,

I’m a layman when it comes to your last paragraph so all I can say is that I hope this is the case.

The saved money will go along way elsewhere I’m sure.


#36

According to:

https://community.advent.com/producthelp/products/geneva/geneva%2016.0/geneva%2016.2/help/Screens/About/About_Defaulted_Bond_Transactions.htm

Coupon/interest stops accruing when there is a non-payment [thus triggering a default on the debt]. So, if this is applicable in our CLNs, and noting the hefty rise in the coupon rate and cash payments, perhaps it was always Zaza’s+SN’s intention not to pay when they reached this ‘point in time’. May be that is another reason why Zaza wanted to have ‘that’ last investor meeting in October 2018?

May be the plan was always to put Hope under intense legal pressure that he would succumb to an acceptable financial settlement, especially as he only paid 25cents to the Dollar on these notes. But alas, they appeared to have underestimated Hope’s zeal, because he called their bluff and liquidated his collateral, namely shares in FRCC and personal guarantees…In my view, the initiation of liquidation proceedings and call up on collateral crystalized the debt at that point in time. Again, I am no corporate lawyer and haven’t seen the ‘fine print’.

Regardless of the legal ins-and-outs, we were kept in the dark with non-disclosure of material information relating to the CLNs.

Looking at the 30 June 2018 financial results, CLN stood around US$35Mln.

Also interesting, in the same accounts, this is what is says about the PSA: In June 1997, the Company entered into a 25-year production sharing agreement with the Ministry of Fuel and Energy of Georgia and State Company Georgian Oil (“Georgian Oil”), which gives the Company the exclusive right to explore, develop and produce crude oil and natural gas (“Petroleum”) in a 5500 square kilometer area in eastern Georgia known as Block 12, hereafter referred to as the “Block 12 PSA”. The Block 12 PSA can be extended if commercial production remains viable upon its expiration in June 2022.

It seems from the unpaid workers’ news article, where Zaza stated that PSA was to 2027 and “this was not enough time for investors to get their investment back”, meant that GoG probably agreed/approved a 5-year extension? Not sure.

Anyway, so much going on that it easy for one to get lost in the detail i.e. Cali case, Texas case, Arbitration.

Looking forward to seeing the news on the Texas hearing which took place last week. The update on that case could have far reaching impact.

As usual, JMO.


#37

I do wonder as I listen to all the noise if there are some diversionary tactics being employed whilst things are dragged into line.

There are so many FRR entities that I wonder if these (unpaid) employees are actually employed by several of these entities and that yes they were not paid by the liquidating asset but employed by a solvent entity. As pressure is being applied to liquidate one entity the employers whilst being paid are being told and paid to protest!

A crazy theory I know but when we look at this as a huge whole the trickery being used by both sides is at times beyond belief.

Liquidation then arbitration result get my vote as the key to unlock this, the rest is diversionary noise hence why much has been kicked down the road.

You do have to wonder why Hope wants and ZM/SN have refused to hand over the shares rather than 2m$ In a company that is a more bust than busted flush? Both side must be utterly nuts to want that hey??

Speaks volumes over all that noise.


#38

Hi Symore I’ve lost track what was the Texas case about?


#39

Chiltern - Hope went to Texas court to enforce the personal guarantees that Zaza and SN had issued against the CLNs. Why Texas? Because SN is resident there and so is FRR’s HO.

Anyway, their guarantees were also secured by their personal shareholdings in FRR of 250M shares each. The cash coupon due on the Notes was around $2m hence the claim for that amount. Makes you wonder why the Directors would put their personal wealth on the line for a company that was seemingly failing. People also conveniently forget that they converted around $26m of their PRNs in to ordinary debt at a hefty premium of 1p thereby automatically subordinating their claim rights below OMF. And what did Hope do for our company? Sweet fck all. But he now wants to take the high moral ground for acquiring a deeply discounted debt. On top of that, he was colluding with other shorters (incl. YA) and interfering with the NOMAD. There is also the allegation of market manipulation. Ultimately, he chose to put himself in the middle of distressed company’s and if he ends up getting nothing, there will be no tears from my side. He is trying to loot FRR investors for his personal gain, and I just pray there is some dirt on him so he ends up with nothing. He will get his comeuppance (I like that word, comeuppance).

JMO


#40

Thank you Symore that clears the mud, I hope for all our sakes we hear some positive news soon