Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
38. According to the most recent financial information made available to the Liquidators,’
which is the Frontera Group’s unaudited financial statements for the six months ended June 30, 2018,
the liability to the Parity Lien Debtholders in respect of the 2020 Notes is likely to be
approximately $29.4 million.
39. I have briefly reviewed documents which indicate that during April 2019, the Frontera
Plaintiffs initiated a proceeding against Outrider in California (the “California Proceedings”).6 Based
5 I understand that the copy of the FRCC Director Guarantee attached to my Declaration was obtained from the publiclyavailable
docket in the California Proceedings (as defined below).
6As I understand from a review of these documents, this litigation followed proceedings in October 2018, wherein the
Frontera Plaintiffs brought an action in the Cayman Islands against Outrider to prevent FIC’s default on the 2020 Notes,
which was later withdrawn. The California Court later sanctioned the Frontera Plaintiffs’ counsel, with whom the
Liquidators have been corresponding concerning the Cayman Liquidation, for failing to disclose the 2018 Cayman
Proceedings.
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on my review, the court in California rejected the Frontera Plaintiffs’ attempt to prevent FIC from being
declared in default on the 2020 Notes.
40. Finally, I have briefly reviewed documents indicating that, around this time, Outrider
sued Nicandros and Mamulaishvili in court in Texas for breach of the FRCC Director Guarantee.
ii. The Arbitration between FRGC and the Georgian Government
41. The Liquidators are largely uninformed about an arbitration proceeding that could
greatly impact the Cayman Liquidation.
42. For some time, FRGC has participated in the Arbitration, which was commenced by
JSC Georgian Oil and Gas and the LEPL State Agency of Oil and Gas (together, the “Georgian
Government”) related to a production sharing contract (the “PSC”) for an area in the Republic of
Georgia known as “Block XII.”
43. According to the limited information provided by the FRCC Directors, FRCC receives
a “royalty” related to oil and gas interests. During a May 2019 conference call, the FRCC directors
stated to the Liquidators that this royalty payment currently produces an annual revenue of “hundreds
of thousands and [could] possibly [scale] up to millions over time.” The Liquidators do not have
information that could confirm or rebut this assertion. Critically, since the commencement of the
voluntary liquidation on May 1, 2019, FRCC has not received any proceeds from this royalty.
28. First, as set forth below in detail, FRGC, the wholly owned subsidiary of FRCC, is
involved in arbitration in London, United Kingdom (the “Arbitration”) that could materially increase
its assets or liabilities, render it insolvent or non-operational. It is axiomatic that this could significantly
impact the value of FRCC’s shares.
29. Second, FRC and FIC (as such, the “Frontera Plaintiffs”) are or have been involved in
multiple proceedings, including in the United States and the Cayman Islands, in which they have sued
Stephen Hope, the principal of FIC’s largest creditor, and his entities in order to prevent the Frontera
Plaintiffs from relinquishing the FRCC Shares it pledged under the applicable promissory notes.4
C. Events Leading up to the Voluntary Liquidation and Supervision Order
i The Note Agreement, the Default on the Notes and Guarantee; Related Litigation
30. In summary, the voluntary liquidation was the eventual result of a default on a note and
guarantee.
31. In or around 2011, Frontera Resources Holdings, LLC (“FRH”), a subsidiary of FRC
exchanged existing notes issued by FRC and then issued promissory notes to mature in August 2016
(the “2016 Notes”). Outrider Master Fund L.P. and its related entities (“Outrider”) acquired and then
managed some of the 2016 Notes.
32. Immediately prior to the maturity of the 2016 Notes, FRH filed for bankruptcy in Texas
and FRC filed a proceeding against, among others, two entities related to Outrider.
4 The FRCC Directors have provided the Liquidators with no information concerning these proceedings, even though the
Frontera Plaintiffs’ filings make it abundantly clear that the FRCC Shares are considered a highly valuable asset.
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33. I understand that Outrider and FIC settled this proceeding after FIC agreed to issue
roughly $23 million of 10% Senior Secured Notes Due 2020 (as amended, the “2020 Notes”) to
Outrider and other noteholders (the “Parity Lien Debtholders”).
34. The 2020 Notes were secured by FIC’s shares in FRCC. A true and correct copy of the
Note Agreement is attached as Exhibit 3.
35. After a near-default by FIC in early 2018, FIC and Outrider amended and restructured
the Notes to require Nicandros and Mamulaishvili to guarantee certain of the interest payments owed
under the 2020 Notes (the “FRCC Director Guarantee”). A true and correct copy of the FRCC
Director Guarantee is attached as Exhibit 4.5
36. Ultimately, FIC could not meet its repayment obligations under the Note Agreement
and, on or about August 30, 2018, defaulted on the Notes.
37. Nicandros and Mamulaishvili also defaulted on the FRCC Director Guarantee.
21. Messrs. Nicandros and Mamulaishvili are also directors of the ultimate parent, FRC, along
with Luis E Giusti. Nicandros is the CEO and Chairman of the Board of Directors.
B. Summary of the Purported Assets, Investments and Liabilities of FRCC
2 See Frontera Resources, available at: https://fronteraresources.com/ (last visited 4 October 2019).
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22. The Liquidators’ preliminary investigation, publicly available information, and the
FRCC’s Declaration of Solvency indicates Nicandros and Mamulaishvili reside in the United States.3
23. As set forth in greater detail below, this Petition is necessary in part because the FRCC
Directors (and their counsel), acting on behalf of the Frontera Group, have been consistently
uncooperative with the Liquidators’ efforts to administer the estate of FRCC for the benefit of its
creditors and stakeholders. In fact, the Liquidators lack information concerning virtually all of the
relevant aspects of FRCC’s business, operations and balance sheet.
24. Specifically, the Liquidators’ administrative efforts have been materially hindered due
to the FRCC Directors’ failure to comply with the Liquidators’ numerous requests for basic information
pertaining to FRCC, its assets, material transactions to which it was a party, and its creditors.
25. The FRCC Directors, have failed to meet repeated deadlines to turnover information
essential to the administration of the estate of FRCC, in particular documents related to a pending
Arbitration (as defined below) involving FRGC, the purported assignment of the principal asset of
FRGC (which is the subject of the Arbitration), and purported liabilities of FRCC of more than $2
million.
26. Based upon currently available information, FRCC’s principal asset is 100% of the
issued share capital of FRGC. Information concerning the assets and liabilities of FRGC have not been
furnished to the Liquidators.
27. The FRCC Directors initially informed the Liquidators that FRCC was solvent and has
no material liabilities. However, an undated balance sheet provided at a later date reported liabilities
relating to “Notes” of some $2.2 million. Given the lack of cooperation, the Liquidators cannot verify
3 The “Taxable Entity” database of the Texas Secretary of State shows that Nicandros, in his capacity as registered agent
of FRC, FIC and Frontera US (as defined below), resides in Houston, Texas.
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the existence of these Notes, the terms and likelihood of their repayment nor the overall financial
position of FRCC.
11. At all relevant times, including at the time of our appointment as the JVLs, FRCC
maintained its registered office at Maples Corporate Services Limited (“Maples”), P.O. Box 309,
Ugland House, South Church Street, Grand Cayman KY1-1104, Cayman Islands. The Memorandum
of Association of FRCC is governed by the Companies Law. A true and correct copy of the
Memorandum of Association is attached as Exhibit 2.
12. Following its entry into official liquidation, Mr. Morrison and I changed FRCC’s
registered address to c/o FTI Consulting, Suite 3212, 53 Market Street, Camana Bay, Grand Cayman,
P.O. Box 30613, KY1-1203, Cayman Islands.
13. FRCC is an intermediate holding company and part of a group of companies which all
use the “Frontera” name (collectively, the “Frontera Group”).
14. The ultimate holding company of the Frontera Group is Frontera Resources Corporation
(“FRC”), a Cayman Islands incorporated entity that is registered to do business and maintains a
principal place of business in Texas.
15. FRC maintains an office at 1201 Louisiana St., Suite 2800, Houston, Texas 77002 and
its registered agent is located at 3040 Post Oak Blvd., Suite 1100, Houston, Texas 77056.
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16. According to its website, FRC is an international oil and gas exploration and production
company whose strategy is to identify opportunities and operate in emerging markets in Eastern Europe
around the Black Sea.2
17. FRC holds 100% of the shares of Frontera International Corporation (“FIC”), a Cayman
Islands exempted company that is registered to do business and maintains a principal place of business
in Texas. Prior to the enforcement action referred to below, FIC held 100% of the shares of FRCC (the
“FRCC Shares”).
18. FIC maintains an office at 1201 Louisiana St., Suite 2800, Houston, Texas 77002 and
its registered agent is located at 3040 Post Oak Blvd., Suite 1100, Houston, Texas 77056.
19. FRCC’s principal asset is 100% of the issued share capital of Frontera Resources
Georgia Corporation (“FRGC”), a Cayman Islands exempted company. As such, the situs of FRCC’s
principal asset is the Cayman Islands. As discussed in further detail below, FIC pledged the FRCC
Shares as security in respect of certain, defaulted notes issued by FIC.
20. The directors of FRCC are Messrs. Steven C. Nicandros and Zaza Mamulaishvili, both
of whom also act as directors of FRGC, along with Mr. Giorgi Zabakhidze (“Zabakhidze,” and
collectively with Nicandros and Mamulaishvili, the “FRCC Directors”).
6. I am familiar with the Model Law on Cross-Border Insolvency, adopted by the United
Nations Commission on International Trade Law (UNCITRAL), and approved by a resolution of the
United Nations General Assembly on December 15, 1997. I also understand that the Model Law has
1 Unless otherwise noted, this Declaration describes Mr. Morrison and I as “Liquidators” even during the period between
our appointment as the JVLs and the issuance of the Supervision Order roughly four months later.
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been adopted in the United States as chapter 15 of the United States Bankruptcy Code, 11 U.S.C. § 101,
et seq. (the “Bankruptcy Code”).
7. Pursuant to the law of the Cayman Islands, court-appointed liquidators, such as myself
and Mr. Morrison, are officers of the Cayman Court. As such, I make this Declaration as an officer
and fiduciary of the Cayman Court, and request an extension of comity for the benefit of all of FRCC’s
creditors and stakeholders, whose interests I represent. Mr. Morrison and I perform our duties as the
Liquidators of FRCC in and from the Cayman Islands, where we both reside.
8. On September 12, 2019, the Cayman Court entered an order in which it, inter alia, (i)
ordered that FRCC be wound up in accordance with the Companies Law and under the supervision of
the Cayman Court; (ii) appointed the Liquidators as the joint official liquidators of FRCC; (iii)
authorized the Liquidators to commence proceedings in the United States for recognition of the
Cayman Liquidation and to request our appointment as the foreign representatives of FRCC; and (iv)
authorized the Liquidators to take control of any of FRCC’s subsidiaries (the “Supervision Order”).
A true and correct copy of the Supervision Order is attached hereto as Exhibit 1.
9. For the reasons discussed below, I submit that: (i) Mr. Morrison and I are each a duly
appointed “foreign representatives” of FRCC in the Cayman Liquidation; (ii) the Cayman Court is a
“foreign court,” and that the Cayman Liquidation constitutes a “foreign proceeding” within the
meaning of sections 101(24) and (23) of the Bankruptcy Code, respectively; (iii) this case was properly
commenced in accordance with the requirements of chapter 15 of the Bankruptcy Code; and (iv) the
Cayman Liquidation satisfies all the requirements to be recognized as a “foreign main proceeding”
pursuant to Sections 1502(4) and 1517(b)(1) of the Bankruptcy Code.
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FACTUAL BACKGROUND
A. Location, Ownership and Management of FRCC and the Frontera Group
10. FRCC was incorporated on February 29, 2000 as a Cayman Islands exempted limited
company, registration number 97554.
DECLARATION OF DAVID GRIFFIN IN SUPPORT OF CHAPTER 15 PETITION OF
FRONTERA RESOURCES CAUCASUS CORPORATION (IN OFFICIAL LIQUIDATION)
FOR RECOGNITION OF FOREIGN INSOLVENCY PROCEEDING
I, David Griffin, hereby declare under penalty of perjury under the laws of the United States as
follows:
1. My colleague Andrew Morrison and I are the duly appointed joint official liquidators
and foreign representatives (the “Liquidators”) of Frontera Resources Caucasus Corporation (in
Official Liquidation) (“FRCC”), a Cayman Islands exempted limited company in liquidation under the
supervision of the Grand Court of the Cayman Islands, Financial Services Division (the “Cayman
Court” or “Grand Court”), Cause No. FSD 138 of 2019 (IKJ) (the “Cayman Liquidation”), pursuant
to Sections 92 and 131 of the Cayman Islands Companies Law (2018 Revision) (the “Companies
Law”) and the Companies Winding Up Rules, 2018 (“CWR”).
2. I respectfully submit this declaration (the “Declaration”) in support of the Liquidators’
petition: (i) seeking recognition of the Cayman Liquidation pursuant to 11 U.S.C. § 1517(b)(1) as a
foreign main proceeding; (ii) our appointment as the “foreign representatives” of FRCC as defined in
11 U.S.C. § 101(24); (iii) declaring the Cayman Court as a “foreign court”; and (iv) certain additional
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relief pursuant to the United States Bankruptcy Code (the “Bankruptcy Code”), as described in detail
below (the “Petition”).
3. I am a Senior Managing Director in the Corporate Finance & Restructuring segment of
FTI Consulting (Cayman) Ltd. I have over 19 years of experience in insolvency and restructuring,
including 13 years based in offshore jurisdictions. I have a Bachelor of Law (LLB) from the University
of Leicester, United Kingdom, am a fellow of the Association of Chartered Certificated Accountants
(FCCA), a Licensed Insolvency Practitioner (non-appointment taking) of the Insolvency Practitioners
Association (UK), and a qualified insolvency practitioner in the Cayman Islands.
4. Andrew Morrison is a Senior Managing Director in the Corporate Finance &
Restructuring segment of FTI Consulting (Cayman) Ltd. Mr. Morrison has more than 20 years of
experience in restructuring and insolvency matters, including 8 years based in the Cayman Islands. Mr.
Morrison is a fellow of the Association of Chartered Certificated Accountants (FCCA), a fellow of
INSOL International, and a qualified insolvency practitioner in the Cayman Islands.
5. I am duly authorized to make this declaration as a Liquidator of FRCC. I am fully
familiar with the facts of this matter and have fully participated in the Cayman Liquidation since my
appointment as a joint voluntary liquidator (“JVL”) of FRCC on May 1, 2019.1 Unless otherwise
indicated, all statements contained herein are true to the best of my knowledge and based upon personal
knowledge or my review of relevant documen
The arbitration could still be ongoing...
66. This is a glaring omission, as the Liquidators have independently learned of multiple,
material developments in the Arbitration.
67. First, the Liquidators were informed on July 9, 2019 by Akin Gump that it ceased acting
for FRGC in the Arbitration a month earlier on June 9, 2019. I would have expected the FRCC
Directors or FRGC to have promptly brought such a material development to the attention of the
Liquidators.
68. The FRCC Directors have not explained the failure to disclose this information.
69. In addition, the Liquidators only learned on July 19, 2019 that FRGC had hired new
counsel in the Arbitration following a direct question on the subject to the FRCC Directors on July 18,
2019. Again, the FRCC Directors did not explain why this material information was withheld. It has
also recently been brought to my attention that the new counsel is no longer acting in the Arbitration
and that this had led to an adjournment of the hearing earlier this month. No update on these
developments has been provided by the FRCC Directors.
70. Withholding critical developments concerning the Arbitration, including the
substitution of counsel that could materially impact upon the effectiveness of FRGC in defending the
claims of the Georgian Government while pursuing the Counterclaim, is emblematic of the FRCC
Directors’ conduct to date, and is yet another reason that the relief requested in this Petition is material
and necessary to a fair and orderly proceeding in the Cayman Liquidation.
Yes only emailed about an hour ago
I’ve emailed them to shareholder email address. Not sure If there is a common location for admin to put them to gain access.
Latest court docs are with admin if anyone interested
Saved them at work which I can’t access from here. Will forward to group admin tomorrow if anyone wants to take a look.
There is a bit about not proving solvency with any meaningful numbers. Leans to playing for time theory
Yes I downloaded them. It’s nothing new.
https://sccinstitute.com/
Worth a read for the general process.
Yeh sent to shareholder email. Read a few more times and think she was generally talking about the whole process rather than specifically our case. Contact shareholder admin for it.
Darkest before the dawn....I hope :)
I will forward to the shareholder group email tomorrow. Yes that was explained as the arbitration keeps it out of national court system but I think the girl meant they do no agree which I don’t think is a revelation to anyone.
I can’t see why people don’t bother on here. Work email can’t access from here. Let me me know if you honestly want me to forward it will send through for what’s worth.
You guys are getting a bit paranoid.
Feel free pal. Either I’ve misinterpreted what was said or it was a small slip. More than happy to forward you the email!!