LONDON (Alliance News) - Waterford Finance and Investment Ltd, the largest shareholder in Gulfsands Petroleum PLC, Monday unleashed another scathing attack on the company after Gulfsands said Dubai-based Arawak Energy International Ltd had terminated the agreement between the two companies, potentially leading to its USD10 million loan to Gulfsands being recalled should the plans to remove its chief executive and commercial director be approved by shareholders.
On Friday, Gulfsands said Arawak had decided to terminate the agreement, which covers the development of new business opportunities in the Middle East and North Africa region, after holding talks with the company and after evaluating public statements made by shareholders and non-executive directors of Gulfsands in recent weeks.
The USD10 million Arawak loan has been a key component of the war of words between Gulfsands and Waterford, which has a 28.08% stake in Gulfsands, as the majority shareholder seeks to remove the company's chief executive and commercial director.
Should Arawak decide to demand repayment, Gulfsands said it would be obligated to repay the full USD10 million, along with USD1 million in additional fees and expenses.
The potential termination of the loan follows months of disputes between Gulfsands and two of its shareholders, who have called for separate board members to be removed due to negligence.
Waterford is calling for Chief Executive Mahid Sajjad and Commercial Director Ken Judge to be removed from their positions. Arawak has told Gulfsands that in the event of the removal of Sajjad and Judge, it will not hesitate to enforce its rights under the loan facility.
Owing to the development, Gulfsands said it has been forced to examine its options to ensure the availability of funding to repay the money under the Arawak facility should repayment be required and to ensure it has funding to continue trading.
On Monday, Waterford said Gulfsand's executive management was "responsible for reckelessley wasting company's and therefore shareholders' resources, in effect practically forcing the company to its knees."
"The highly unusual Arawak loan terms, that include what is in effect a "poison pill", can only be explained by the executive management's collusion with their "sponsors" to surrender control over the company's assets to an outside predator. It is surprising that the company's executive management did not approach the company's existing shareholders to discuss the possible financing of the company before proceeding with the Arawak loan," said Waterford in a statement Monday.
Waterford has previously stated that the majority of Gulfsand shareholders agreed to remove Sajjad and Judge at an original meeting on January 13, that was cancelled by Gulfsands on the basis of a legal technicality.
Waterford has reiterated its opinion and urged shareholders to remove Sajjad and Judge regardless of the implications of the Arawak loan deal.
"We encourage shareholders not to be influenced by the company's corporate update to change their decision on the resolutions to be considered at the further general meeting and we again ask shareholders to vote IN FAVOUR of resolutions 1 and 2 to remove Mr Sajjad and Mr Judge as directors and AGAINST resolutions 3, 4 and 5 to remove Mr West, Mr Golightly and Mr Bell," said Waterford.
Alongside calling for the removal of Sajjad and Judge, Waterford have defended three other directors of Gulfsands. Abdul Rahman Kayed, another major shareholder who holds a 9.75% stake, has called for the removal of Chairman Andrew West and Independent Non-Executive Directors John Bell and James Ede-Golightly.
Kayed has not released any reasons for his call to remove the three directors.
Waterford has defended the positions of West, Bell and Ede-Golightly, arguing it believes the company has a sufficient number of non-executives in place to ensure good corporate governance.
The company's shareholders will vote on the proposal at an extraordinary general meeting, due to be held on February 3 after it was delayed from its original date of January 13.
Gulfsand shares dropped 5.4% to 26.03 pence per share on Monday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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