By Shina Loremikan
When will debt owing make you lose your company?
The above question has been agitating my mind since I read media reports on one Jacques Roomans, the promoter and president of Sea Trucks Group, being on the verge of losing his company to its erstwhile managers due to defaults on a $575 million senior secured bond financing the company took in 2013.
Yes, the prevailing economic condition in the country has necessitated companies to diversify their sources of raising funds. And one of such viable option is through bond issuance, which unlike equity funding does not deplete control and ownership.
According to Investopedia, a bond is a debt instrument wherein an investor loans money to a business entity for a defined period of time.
Though defaults necessarily could lead to liquidation â€“ the selling of the company asset to offset debts â€“ it does not lead to take-over as is the case we are reading in the media.
Specifically, the reports on the STG case say the interest of 9 percent per annum on the $575 million bond was paid consistently without default from March 2013 to October 2016, with about $120 million paid down by Roomans to reduce the face value of the bond to $456 million.
The reports further claimed that following a lull in the Nigerian economy and the ensuing recession, Roomans consolidated Sea Trucks and West African Ventures (WAV), another company of his, as an entity with Frazer Moore, Tom Ehret and a host of other ex-expatriates as management staff.
Roomans also alleged that Moore, who was the initiator of the bond issuance, started putting pressure on him to make him chief executive officer of STG/WAV, which he refused, and that following his refusal to accede to Mooreâ€™s request to be appointed as the chief executive officer, he left the company.
He said that was the genesis of his problems, claiming that Moore engineered the other expatriate staff to deliberately default, which made the bondholders to come calling.
He specifically noted that Moore was behind the scene, pushing the other expatriates to encourage him to transfer his shares in STG to Anglo Saxon Trust (AST), a trust company to safeguard his interest.
One of the expatriates, Peter de Ruiter, then reportedly organised the transfer of the STG shares to AST, a company that is incorporated in Jersey. However, immediately the expats succeeded in transferring the shares to AST, they all resigned from the board and the company.
Upon the exit of these expats, Jacques, who still wanted to see his business continue, constituted a new management team to run the affairs of STG and WAV. Graeme Pennycook and Per SchÃ¸yen were appointed to head the new management.
Again, it is claimed that Fraser led other expats who had left, to start instigating the bondholders and the appointed trustees (AST) to put pressure on Jacques, despite the fact that the company was, regularly, paying its interest and there were no issues.
Bowing to the pressures, Jacques, with Graeme Pennycook and Per SchÃ¸yen, agreed to meet the bondholders in London in July 2016. At the meeting, it was decided that the bondholders would nominate a representative to the board. It was a shock, when Peter de Ruiter who was one of the expats who left in May 2016, emerged as the acting advisor to AST- a glaring conflict of interest, having earlier introduced Jacques to the trustees.
The story is long but my pick on the issue is when does the process for calling a bond lead to liquidation, using the STG case as an example and does liquidation means take-over?
From the reports, the erstwhile expatriates-managers have essentially engaged in a takeover bid and not liquidation as they have claimed insolvency. Compulsory liquidation or â€œwinding upâ€ as is the case of STG is a court-based procedure under which the asset of a company are realised and distributed to the companyâ€™s creditors. In addition, the term â€œliquidationâ€ is sometimes used when a company wants to divest itself of some of its asset. This is used, for instance, when a retail establishment wants to close store. They will sell to a company that specialises in store liquidation, instead of attempting to run a store closure sale themselves.
Again the liquidator will normally have a duty to ascertain whether any misconduct has been conducted by those in control of the company, which has caused prejudice to the general body of creditors.
To this end, we need to establish the motive and roles played by the likes of Frazer Moore, Tom Ehret and a host of ex-expatriates staff of STG/WAV who are carrying on as if they are owners of the business – attempting to sidestep the original owner, Jacques Roomans – in what is now being touted as a grand corporate conspiracy.
Frazer Moore and his colleagues are alleged to have founded a new company, Telford Offshore, which have allegedly taken over the asset of STG, which under liquidation rules should be disposed to realise cash to pay creditors.
It has specifically acquired four DP3 multi-purpose offshore construction vessels from Sea Trucks.
Their actions also run counter to court orders. In a suit filed by WAV against the liquidators on June 20, 2017, WAV had applied for an order of interim injunction restraining the liquidators from taking any steps or undertaking any business.
WAV believes that maintaining status quo means the company would continue to operate the OOIM vessels fleet in Nigeria without any interference. STG and its affiliates and all third parties can only bid for, offer or engage in the provision of the DP3 vessels in Nigeria and West Africa through WAV or with WAVâ€™s express and written consent.
The STG issue is curious because its executive management that took the bond, and who were known to be interfaces of the company with the bondholders are the ones appointed as administrators of the same company in liquidation.
There are lots of questions that need answers concerning this case: Do you call in a bond that has consistently met its obligation for three years and has even paid down about a quarter of the sum raised just because of a three-month default? Was there attempt to restructure and do a loan workout? And is a company in liquidation, with affiliate companies who are not in liquidation, allowed to transfer jointly owned asset?
Much as we welcome investors of any hue to our clime there should be some modicum of respect for our laws and laid down international procedures and processes. The government of the day should see to it that justice is served and investors protected from hostile takeovers.
The executives who were part of the bond issuance should not have anything to do with the liquidation process and their role, both in the default and asset stripping of the company, should be probed.
â€“â€“â€“Shina Loremikan is Coordinator of the Campaign Against Impunity.