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Perfect Storm

lse:frr

#1

Well, another week comes to a close and apart from the email from Yellow Jersey, we are still none the wiser on what is going on. But to be fair, news this week was going to be on the low side after the festive period. In fact I think news next week also looks pretty slim.

Anyway, I started trawling through FRR’s Twitter feeds and it was interesting to note that they first posted a short video clip on the oil seep at Taribani on the 27th Nov, and then the black & white picture from the 1960s of the blowout at B-16 (BTW is T-16 the old B-16?). This was then followed up by another 2 short video clips of oil seep on the 2nd December. Just a supposition but I believe these postings may have been done to support the financing discussions. Actually nearly 3weeks after those tweets, we got the RNS confirming a indicative terms sheet had been signed. And the fact this was achieved without Mr Hopeless being around, confirms the company’s allegation that he was not acting in the best interest of the shareholders; another bit of evidence to support the Fiduciary breach.

So, back to the reply from YJ, it could be that the lenders have indeed completed a site visit now and if so, we should be in the final stages of legal documentation. If this is the case, we could be in a position to repay the debt if the injunction is lifted. Remember, legally, once a noice of default has been served the company is given specific period to repay the debt before the collateral is called upon. But for sake of balance, there is still no guarantee that financing will be approved, so let’s not get ahead of ourselves.

As far as the fiduciary case is concerned, I think FRR has a good case, and they will be doing the investor community a service if they elimated this vulture fund by winning the $56m case (#Madagascar Oil). In fact, I was doing some research and couldn’t find another situation where a bondholder was appointed as a Board Director, because it can lead to an indisputable case of conflict of interest. But surely Hope(less) couldn’t have been that stupid!? What I do know is that bond holders are normally organised through a steering committee and not via representation to the Board.

Anyway, just some thoughts while we continue to wait.

Happy weekend all.

JMO


#2

Interesting post SB - and we all await with baited breath.

Regarding Hope being a director I also posted on this sometime back. Agree with you that this is highly unusual and I can’t recall a single similar situation (would be different of course if Hope had held equity in the business). I used to do a fair bit of work with growing FS businesses and when a major provider had supplied serious cash based lending a representative of the lender might well attend key meetings, board meetings etc - but always as an observer and never as a director. Why? Well simply to avoid the conflict of interest that we have seen of late.


#3

Dev, i agree it is unusual that Hope should have been appointed to the Board as it has conflict of interest written all over it if he were to pursue his/OMF stated purpose.

Could his appointment to the BOD therefore have been a deliberate attempt by SN to align him with the interests of shareholders? And, provide a litigation backstop if he proved to be mischievous?


#4

BV - not sure!

My own view is that they were between a rock and a hard place in 2016 - and whilst this was clearly a “hostile” appointment (check the RNS that announced it - no warm words) they probably also decided to simply accede and see how it all worked out. I think they also expected a strategic partnership to have happened before year 2 of the loan term kicked in, and whilst the veto was always a risk until you see it work in practice you can’t be sure.

As soon as the veto started to prevent further funding I suspect SN/ZM will have started to take legal advice - and no doubt Moruant were involved long before the events of early October. One of the standard rules regarding an injunction is not to let your adversary know that you intend to apply for it - and injunction requests are often filed at the last moment. However on 15th October - 4 days after the injunction was granted - FRR also stated that “the action includes Outrider Master Fund, L.P. for conspiring with Mr Hope in relation to the above matters”.

All guesswork of course - but I can’t help thinking that the YA issue also had something to do with this. But not for cross-default reasons - more likely some other information that arose from investigating the YA actions in late August. However we may never find out.

JMHO


#5

Thanks Devex
Do you think Zaza knew about the upcoming court case or was at least in preparedness for it at the last meet up? Only that he appeared very comfortable explaining our potential and the only comment referring to YA was that they only pursue if it’s ‘cast iron’


#6

Chilterns - who knows! I think the injunction must have been lined up as a possibility, but I also think that Zaza thought a deal with BH was going to be agreed regardless. My guess is that there was something about to happen that was blocked - and the injunction was therefore deployed. The MOU was probably a holding position - but of course was signed by both parties. Cairn would only have agreed the MOU RNS on seeing a copy of the signed MOU.


#7

Thanks Devex


#8

Judging from the posts on the different threads on here today, it looks as if we will be delisted on the 24th. Such a sad state of affairs.


#9

Unfortunately this is a now a real possibility…1 week between the next court case and delisting. There could always be a new NOMAD then the shares relisted again with the subsequent share price hammering unless any good news stories are released alongside the ongoing legal proceedings. Alternatively, an OOC settlement is agreed after the hearing 17.1.19…we certainly have little time left here and I’m starting to get a little more pessimistic as time passes.


#10

I think there is scope for a new Nomad to be appointed (thus avoiding delisting) but for trading in the shares to remain suspended, pending the outcome of litigation. Can’t highlight specific examples right now but I’ve been investing a long time and have been aware of suspensions lasting much longer than a month.

In another thread I’ve posted a link to this webpage highlighting how proceedings are dealt with in the Cayman Courts:
https://uk.practicallaw.thomsonreuters.com/2-633-8594?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1

This extract should be digested in order to understand where we are in the process:

"Notice to the defendant and defence

A defendant to a claim is entitled to notice of the claim against it. Where proceedings are commenced by ordinary writ, the claimant must serve on any local defendant within four months of issue of the writ. Where the defendant is outside the Cayman Islands, the writ must be served within six months.
The time for filing the defence depends on whether a statement of claim was served with the writ. If a statement of claim was served with the writ, the defendant must both:

File an acknowledgment of service giving notice of its intention to defend the claim within 14 days of service (extended to at least 28 days if the defendant is served outside the Cayman Islands).

File and serve a detailed defence (and any counterclaim) within 14 days of filing the acknowledgment of service.

If a statement of claim is not served with the writ, the defendant must file an acknowledgement of service within 14 days of service of the writ (extended to at least 28 days if the defendant is served outside the Cayman Islands). The claimant must then serve a statement of claim within 14 days of service of the acknowledgement of service and the defendant must serve its defence (and any counterclaim) within 14 days of service of the statement of claim.

All of the above time limits can be extended either by agreement between the parties or by way of court order.

Subsequent stages
The subsequent stages of a proceeding are as follows:
The claimant has 14 days from service of the defence (and counterclaim) to file a reply to the defence (and a defence to any counterclaim).
Disclosure must commence 14 days after the expiration of time for filing the last reply.

After the close of pleadings, a case management conference will ordinarily be scheduled to give directions for the further conduct of the case and set the timetable for the remaining pre-trial procedures such as discovery (if it has not already occurred), exchange of witness statements, provision of expert evidence and scheduling the trial date. Depending on the complexity of the case, a number of case management conferences may need to be held.

All subsequent deadlines can be extended by agreement between the parties or by way of court order.

Interim remedies
10. What actions can a party bring for a case to be dismissed before a full trial? On what grounds must such a claim be brought? What is the applicable procedure?

Strike out
Parties can apply to strike out the whole or any part of the other party’s statement of claim or defence and seek judgment on the basis that the offending pleading:
Discloses no reasonable cause of action or defence (and there is no chance of curing the defect).
May prejudice, delay or embarrass the trial of the action.
Is scandalous, frivolous or vexatious.
Constitutes an abuse of process.
Typically, little or no evidence is permitted in support of an application to strike out a pleading, as the document must be considered on the terms pleaded.

Summary judgment

Both claimants and defendants can apply for summary judgment, which is an expedited hearing of the dispute based on affidavit evidence only. The court will only grant summary judgment if it is satisfied, on the evidence presented to it, that the claim or the defence has no realistic prospect of success. The court will not grant summary judgment where there are disputes between the parties in relation to matters of law or fact that merit investigations at trial and are inappropriate for summary resolution on affidavit evidence."

I think it is therefore possible that FRR apply for summary judgement or strike out at this hearing.

Tot


#11

Further to the above post a quick google search revealed that on the 29th June last year trading was suspended in the stock of Defenx pending publication of its annual accounts. Trading did not recommence until 2nd October following late publication of the accounts and the securing of finance.

This article on suspensions is also worth reading:https://aim-watch.com/articles/trading-suspensions-overview/
Note the statement that “Finally, when it comes to AIM, should the securities of any company be suspended for six months, the securities will be be cancelled from trading unless an extension has been granted.”

I therefore think that provided a Nomad can be appointed promptly we could remain suspended until the outcome of the litigation is known.

Tot