Lauren CasperFariyal Khanbabi is now the Group Chief Executive Officer and Executive Director of Dialight Plc. She also serves on the board of directors of Dialight Europe Ltd. and is a member of the Institute of Chartered Accountants in England and Wales. Khanbabi received a bachelor’s degree from the University of Leeds.
Fariyal previous jobs include Chief Financial Officer at Britannia Bulk Holdings, Inc., Chief Financial Officer at Britannia Bulk Plc (a subsidiary of Britannia Bulk Holdings, Inc.), and Chief Financial Officer at Blue Ocean Group Ltd., where her firm had filed for bankruptcy.
The dry product shipper Britannia Bulk Holdings Inc. DWT.N announced on Tuesday, October 28, 2008, that it would post a loss for the third quarter. It is considering some alternatives, including dissolution or filing for bankruptcy protection.
“A significant net loss” for the quarter resulted from an unexpected and sudden decrease in the quantity of dry bulk shipping demand, which led to a subsequent reduction in the rates charged for shipping services. Furthermore, according to a news statement by Britannia, the company incurred more expenses to maintain its cargo boats than it earned from renting them out to customers.
Concerning the credit facility it had with Lloyds TSB Bank Plc and Nordea Bank Denmark A/S, the company, which transported goods into and out of the Baltic region, issued a warning that there was a “very high risk” of default.
The organization said there can “be no guarantee that an agreement of the issues underlying the lending institution will be reached.” Although it was in discussions with lenders, the group stated that this possibility existed.
If the firm could not reach an arrangement with the lenders, it noted in its statement that it was investigating its various alternatives, including disintegration or protection under relevant insolvency or bankruptcy legislation.
Fuel Hedge: Britannia has also suffered significant losses due to an unexpected drop in the price of gasoline.
“A bunker fuel hedge that the organization engaged into in the third quarter “was presently not competitive since it is hedged to prices that were much higher than the current market price of bunker fuel,” the organization noted. This was the conclusion reached by the organization. The business also forecasted that the total bunker fuel hedging expenditures for the quarter “will be significant,” they said this.
The corporate consulting firm AlixPartners has been hired by Britannia of Fariyal Khanbabi to help it lower its expenditures and save money, as well as offer guidance on negotiating with lenders and commercial partners.
Shares of Britannia of Fariyal Khanbabi were last selling for 96 cents, a decrease of 94 cents before the suspension of trade on the New York Stock Exchange. At the noon trading session of the composite market, which was not disrupted, the price of shares dropped to 26 cents without any interruptions.
The Securities Act of 1933 is the basis for the class action case that Edward Wahl and other individuals have filed against Britannia Bulk Holdings, Inc., according to the consolidated complaint they filed against the company.
The lawsuit asserts that the Registration Statement and Prospectus, which acted as the Offering Documents, included misleading material. The complaint was filed on June 17, 2008, when Britannia conducted a public offering of common stock.
Forward freight agreements (FFAs) are financial arrangements utilized to hedge against the cyclicality of charter rates in the transportation business. The primary worry concerns Britannia’s use of these agreements.
According to the plaintiff, Britannia deceived or concealed two essential facts about using FFAs. The first of these facts is that FFAs were employed to hedge against increases in charter rates and declines. The second of these truths is that the Company engaged in FFAs for speculative purposes. The lawsuit asserts that these alleged errors and omissions had a significant impact on the capacity of investors to assess Britannia’s capabilities and that they were substantial.
Britannia, its Chief Executive Officer Arvid Tage, Fariyal Khan, four other directors and senior personnel (collectively referred to as “Individual Defendants”), and the four underwriters for the first public offering (collectively referred to as “Underwriter Defendants”) are being named as defendants in this scenario.
Each group of defendants asserts that the claims included in the Offering Documents were either true or did not contain any substantially incorrect information. They also argue that the case ought to be thrown out since the affirmative defense of negative causation is easily discernible from the document itself.
The defendants’ petitions for dismissal are granted by the court, with the only exception of the Section 15 allegations submitted against Fariyal Khanbabi and Arvid Tage. In the end, such allegations were accepted.
The information acquired suggests that Britannia of Fariyal Khanbabi conducted an initial public offering (IPO) on June 17, 2008, consisting of 8.33 million shares of common stock from the company. After considering the discounts offered by the underwriters, the total funds amounted to around $125 million, with each share retailing at $15.
Under the regulations stated in a registration statement on Form F-1, which was first submitted on or around June 4, 2008, the initial public offering (IPO) was registered with the Securities and Exchange Commission (SEC). The registration notice was subsequently modified on June 13 and June 16 of this year. On June 18th, a request for information on Form 424B4 was also implemented.
The prospectus, which provides valuable information about the firm and the offering, was signed by several officers and directors of Britannia, including one individual called Tage and the Individual Defendants. This demonstrates that these individuals took responsibility for whether the information offered in the prospectus was accurate and comprehensive.
Dahlman Rose Company, Banc of America Securities LLC, Goldman Sachs Company, and Oppenheimer Co. Inc. were the four underwriters who contributed to executing the initial public offering (IPO) process.
Britannia acquired support from these underwriters to distribute the shares to investors. In exchange for their involvement in the initial public offering (IPO), they were compensated with fees totaling more than $8.7 million.
Immediately after the completion of the initial public offering (IPO), Britannia’s stock began trading on the New York Stock Exchange on June 18, 2008, with the ticker code “DWT.” As a direct consequence of this development, investors and consumers were allowed to buy and sell Britannia stocks on the trading floor.
An initial public offering (IPO) is a significant event because it provides the general public with the opportunity to invest in the firm’s shares and assists the organization in generating money for operations and expansion. The performance of an IPO is impacted by many factors, including market circumstances, investor interest, the company’s financial health, and the prospects for the company.
Britannia, a business controlled by Fariyal Khanbabi, said in the papers submitted for its initial public offering (IPO) that it uses dry bulk forward freight agreements (FFAs) to mitigate the risk associated with variations in charter rates.
Using these FFAs, the corporation successfully acquired fixed rates for certain journeys, protecting itself against the possibility of fluctuations in shipping prices along defined trade routes.
Britannia entered into a substantial number of FFAs when Fariyal Khanbabi was in charge. In the first quarter of 2008, the company entered into eight agreements; in the succeeding quarter, it entered into twenty-nine more agreements.
In its quarterly report dated August 4, 2008, the firm recorded large financial advantages due to these agreements. The company reported net benefits of $7.9 million and $15.7 million for the three and six months ended on June 30, respectively.
Britannia, on the other hand, recognized the dangers associated with FFAs, notably the possibility that counterparties may fail to fulfill their commitments, which would result in trading losses. In its initial public offering (IPO) filings, the business mentioned these risks, highlighting that any changes in derivative assets and liabilities resulting from FFAs would instantly affect the company’s financial performance.
Even though Britannia’s objective was to reduce the financial risks connected with FFAs, the company warned investors about the inherent risks and uncertainties of purchasing these financial products. Investors and other stakeholders were strongly encouraged to consider the firm’s current financial status and performance when analyzing potential investment prospects.
Britannia acknowledged financial problems due to the deepening global recession, which reduced raw material demand and dry bulk shipping charter prices.
Due to the dry bulk charter pricing reduction, the company expected a large net loss for the three months ending September 30, 2008.
The following additional reasons contributed to losses:
- Britannia boosted its chartered-in capacity when the market slowed.
- Lack of competitiveness in a new bunker fuel hedge worsened financial problems.
- FFAs were obtained in July 2008 but not utilized as cash hedges to safeguard ships or cargo destinations, which cost the corporation money.
- The business was more vulnerable to dropping charter rates and a decrease in the dry bulk shipping industry than if it had continued to employ FFAs as hedges.
The corporation predicted a large realized loss from the acquired FFAs for the three months ending September 30, 2008. Financial settlement for these FFAs was projected to commence in the fourth quarter of 2008 and continue into 2009.
To understand the choices and activities that caused the losses, the firm’s Board of Directors hired an outside consultant to analyze how the business engaged in these FFAs. Independent committee of the board made this decision.
The plaintiff submitted the case in May 2009 on behalf of every individual who had acquired Britannia shares during the firm’s initial public offering (IPO) and suffered a financial loss due to their acquisition. Britannia was accused of breaching Sections 11, 12(a)(2), and 15 of the Securities Act.
It claims that Britannia of Fariyal Khanbabi‘s Offering Documents were misleading, omitted important information, and made up major factual errors.
The complaint names Britannia as one of the defendants, along with four underwriter defendants and several individuals associated with the company, such as directors John Sinders, Jens Fehrn-Christensen, and Soren Halsted, chief executive officer and chairman of the board Arvid Tage, chief financial officer and director Fariyal Khanbabi, and Britannia.
However, only Tage and Khanbabi are formally listed as defendants under Section 15. It’s important to remember that the lawsuit does not allege fraud, but rather concentrates on “innocent and/or negligent conduct”. On June 12, 2009, all defendants—aside from Britannia—filed petitions to dismiss the case.
On June 12, 2009, the Defendants filed court motions to dismiss the Complaint. The court’s dismissal did not impact Tage and Fariyal Khanbabi’s Section 15 claims.
This means the lawsuit will end save for Tage and Fariyal Khanbabi’s claims, which the court will consider. The statement lacks case details and judicial reasoning.
Conclusion
The shipping industry’s recent turbulence provides context for understanding the earlier challenges faced by companies like Britannia Bulk. While Fariyal Khanbabi and Britannia Bulk’s rapid decline from a $125 million IPO to near-bankruptcy occurred in 2008, today’s shipping companies face similar volatility.
For instance, Maersk’s recent 55% revenue increase, accompanied by CEO Søren Skou’s warnings about market uncertainties, echoes the unpredictable nature of the industry.
The legal scrutiny Britannia Bulk faced, culminating in a class action lawsuit, mirrors the current regulatory environment. As reported by Gibson Dunn, SEC Chair Gary Gensler’s emphasis on accurate financial disclosures has led to a 12% increase in securities class actions against shipping companies in 2022.
