24th Jan 2014 16:40
LONDON (Alliance News) - Fire East Corp Friday reminded shareholders in Urals Energy PLC of its proposal to remove the six existing members of the Urals Energy board at the company's upcoming extraordinary general meeting January 27.
The company, which has an 18.9% stake in Urals, said that on January 22 it received confirmation from UEN Cyprus Ltd that it has commenced arbitration proceedings against Urals and criminal proceedings against Alexey Maximov, chief executive of Urals.
The UENC decision relates to a debt repayment agreement into which it alleges Urals entered in December 2010 and which would make Urals Energy liable to pay USD41.7 million.
Urals Energy said it could not immediately comment on Fire East's allegations.
However, in a separate statement Friday Urals Energy said that if the proposed resolutions to oust the board members were approved at the EGM it would be "left without any directors on the board" as Fire East has not yet proposed any alternate directors and had withdrawn its request that Maxim Barskiy and Jonathan Kolleck be appointed to the board.
Urals warned that if it were left with no board it would "be forced to seek the immediate suspension of its shares as it would be unable to operate effective as a quoted company, pending the appointment of a suitably experience board."
Urals Energy argued earlier this month that it has no reason to believe the debt repayment agreement was genuine, and therefore did not believe that the company is bound by the terms. The firm said it had no record of the transaction and that due to inconsistencies in the document, the board concluded that the alleged agreement is a forgery and an attempt by a third party to defraud Urals Energy.
Urals Energy said that the alleged agreement was passed to the company's chairman via a Moscow-based investment banker who said he was acting on behalf of Maxim Barskiy, a board member of Fire East, and Dmitry Bosov, a major Russian businessman whom Urals Energy argues is connected to the takeover group.
Fire East said that there is now a clear threat of bankruptcy hanging over Urals Energy with regard to the debt repayment allegations and urged shareholders to vote for its takeover of the company.
However, Fire East said that directors it had proposed to join the board following its possible takeover, now are not prepared to expose themselves to the liability they may incur by being linked to a company nearing bankruptcy, and so Fire East has written to Urals Energy to withdraw the resolution regarding the new directors from the upcoming EGM.
Urals said earlier this month that Fire East does not have a viable strategy for Ural Energy's development, and it will undermine efforts of recent years by the company to clear out struggling legacy assets.
Urals Energy said Fire East has plans to acquire what it called a high-risk asset on Sakhalin Island in the Russian Far East. The plan has both geological and financial risks for Urals Energy, the company claimed, adding there is a real danger that shareholders will have their interests in Urals Energy significantly diluted if the resolutions are passed.
Urals also said that a visit by the police earlier in December, which led to the removal of certain files from its offices in Moscow, may have been an attempt to intimidate the board into acting against the best interests of shareholders, citing possible connections between the police visit and both a loan due from a former director of Urals Energy, Vyacheslav Rovneiko, and the alleged debt repayment agreement made by the company.
UEN Cyprus is owned by Rovneiko, who was ordered in 2012 to pay the company USD3.7 million by arbitration proceedings in London to recover a separate loan agreement.
Urals Energy said it is yet to receive the cash it is owed by Rovneiko, but it has managed to auction off personal belongings of Rovnieko's, found in his registered home in Belgium. Also, in both Russia and Cyprus there are court orders for the seizure of all of Rovnieko's assets.
Urals Energy said that if allowed to vote, Rovneiko would vote for the proposals, and the new board may waive the repayment owed to the company by Rovneiko.
In September, Urals Energy's two biggest shareholders, Fire East and Alpcot Capital Management Ltd, launched the attempt to remove all boardmembers because they think the company is underperforming.
The company noted that Alpcot Capital Management since has sold all of its shareholding in the company and that Torbjorn Ranta, the representative of Alpcot on the company's board, subsequently resigned.
The Alpcot shares were bought by Adler Impex SA which is now the beneficial owner of 25.08% of the company and, according to Urals, is ?fully supportive? of the existing management team.
Earlier in the month, one separate interested party pulled out of talks regarding the company's takeover after the police visit and alleged debt repayment notices made the acquisition opportunity less desirable.
Urals has urged shareholders to reject all the motions by Fire East and former holder Alpcot who called for the upcoming extraordinary general meeting.
Fire East said in its statement Friday that it is grateful to shareholders in Urals Energy for their support given the "untrue and unsubstantiated allegations, lies and other forms of pressure the existing board and management of the company directed towards us since we requisitioned the EGM."
"Unfortunately it seems that only by forcing the removal of some or all of the existing members of the board, is there any hope of a new board being put together who could effect the urgent changes needed for the running of the company's business," Fire East said in the statement.
Urals Energy shares closed down 5.3% at 6.75 pence Friday.
By Tom McIvor; [email protected]; @TomMcIvor1
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