12/11/2010 - 15:38

Yara lifts veil on Burrup concerns

12/11/2010 - 15:38

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Norwegian fertiliser giant Yara has lifted the veil on its concerns about the financial dealings of Burrup Holdings, controlled by Indian business couple Pankaj and Radhika Oswal, in a hearing of the Federal Court in Perth.

Yara lifts veil on Burrup concerns

Norwegian fertiliser giant Yara has lifted the veil on its concerns about the financial dealings of Burrup Holdings, controlled by Indian business couple Pankaj and Radhika Oswal, in a hearing of the Federal Court in Perth.

Yara, which owns 35 per cent of Burrup, this week launched legal action to gain access to the fertiliser producer's accounts, which are now more than four months overdue.

Representing Yara in court yesterday, barrister Richard Douglas said he considered it "a very grave state of affairs" when a company could not publish its accounts when they were due.

Rejecting Burrup's suggestion the delay was due to its proposed change in status from that of unlisted public company to private company, he said he could see "no reason" why that would prevent it from meeting its current reporting obligations.

Mr Douglas also cited concerns over alleged financial irregularities as a reason for Yara's desire to see Burrup's accounts, including the apparent "differential payment" of dividends to the Oswals and Yara.

Mr Douglas told the court that Burrup had declared a $30 million dividend to be paid in July last year, that was to be distributed to the Oswals and Yara according to their relative equity in the company. Mr Oswal owns 30 per cent of Burrup, while Mrs Oswal owns 35 per cent.

Mr Douglas said that although it appeared the Oswals had been paid in full, by August of this year Yara had still not received 75 per cent of the $10.5 million it was entitled to.

Yara belatedly received the outstanding sum this week, he said.

Mr Douglas said the "unexplained differential payment" of dividends to shareholders was a matter of major concern to Yara, and that it needed to inspect Burrup's accounts to determine if there was any justifiable reason for the differential payments.

"There may be an explanation, but none has been forthcoming," he said, adding he could think of no reason why shareholders of one company would be paid "differentially".

Mr Douglas said Yara also wanted access to Burrup's accounts to understand the reason for an "unauthorised $22 million related party transaction".

The $22 million transaction was described as a "pre-payment" on a $US350 million bank facility, referred to as the PLAS facility, for which Yara did not believe Burrup was liable.

Mr Douglas noted the Burrup board had later been asked to authorise the PLAS payment "retrospectively" in September this year, but that that authorisation had been denied.

Mr Douglas said Yara was also concerned about liability for $60 million in interest payments that would be owed over the term of the PLAS facility.

Similarly, Yara had concerns about payments made by Burrup to Oswal-linked shipping company, Maruti Shipping.

Mr Douglas said despite being a major shareholder of Burrup, it had found it extremely difficult to gain answers to its questions about the company's dealings.

"A lot of shaking has been required to loosen fruit from that tree, your Honour," Mr Douglas told Justice Michael Barker.

Burrup maintains that Yara has no reason to take court action because it had already been promised access to inspect the accounts..

But Mr Douglas said Burrup's offer was highly conditional and involved "novel confidentiality" arrangements that were not acceptable to Yara.

In a statement yesterday, Burrup attacked Yara's court action as "a cynical attempt to muddy the waters" in relation to a commercial dispute over the pricing of ammonia exports from Burrup's ammonia plant near Karratha.

"Today's court proceedings appear to serve no other purpose than to waste the company and shareholders time and money, to circumvent the shareholders agreement and harass and intimidate Burrup, its executives and Mr Oswal," Burrup said in its statement.

"The continued legal wrangle by Yara is nothing more than a cynical attempt to muddy the waters on the dispute over the benchmark reference price for ammonia. Burrup believes that the current reference price; upon which Yara's performance is measured, is not in the best interest of Burrup Shareholders."

Justice Michael Barker adjourned the case this morning to allow lawyers for each party to finalise the terms of a confidentiality agreement that would allow Yara to have access to Burrup's accounts.

The court was told that broad terms of agreement had been reached but needed final sign-signatures before they could take effect. The matter was due to resume at 4pm today. It was subsequently adjourned again until 2pm on Monday afternoon.

Separately, Burrup today filed a writ in the WA Supreme Court seeking orders forcing Yara to facilitate Burrup's reversion to private status, in line with an agreement it said had been reached by the parties in January 2008.

According to the writ of summons, under the 2008 agreement, both parties agreed that Burrup would revert to private status if it did not proceed with a public float that was then expected to occur late that year.

The proposed float was subsequently cancelled, and was no longer under consideration.

As Yara had refused to facilitate the company's reversion to private status, Burrup said it was seeking orders that would force Yara to live up to the agreement.

 

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