New York -- (MARKET WIRE) -- March 22, 2007 --
Europa Partners Limited
22nd March, 2007
RESPONSE TO CARDINAL RESOURCES' LETTER TO SHAREHOLDERSQvt Financial LLP ("QVT") takes note of the letter sent by the board to ordinary shareholders on 20th March, 2007, which contains a number of misrepresentations. In the interests of brevity, QVT only draws attention to the following:
- Despite repeated requests, the Board still appears unable to give shareholders a direct answer to the question as to what voting rights Silver Point Finance currently has over Cardinal Resources Finance Ltd, and refers them instead to that company's articles. These indicate that Silver Point can cast almost 40% of that company's votes, even without exercising a single one of its more than 120 million warrants, which themselves both outnumber the entire issued share capital of Cardinal Resources plc, and have exercise prices well below the price paid by investors in Cardinal's initial public offering less than two years ago. - Despite repeated requests, the Board still refused to tell shareholders whether there is a restriction on Cardinal Resources Finance Ltd upstreaming dividends or other distributions to Cardinal Resources plc, the quoted parent. The effect of such restrictions would mean, for example, that the quoted parent could become insolvent even whilst the subsidiary were trading profitably. The potential gravity of this is so obvious that QVT believes it to be totally inadequate for the Board, and its advisor, Nabarro Wells, to argue that all relevant information regarding the Silver Point Financings are in the public domain. QVT again asks, are there any such restrictions? - The Board in their letter state that they "will not sell the Company without securing an appropriate price that they can recommend to shareholders". If shareholders were to approve the Silver Point warrants being exercisable at parent company level, Silver Point Finance would at any time be able by that simple exercise own more than, and be able to outvote, all the other existing shareholders combined. This would enable them to replace at will the present Board, whose views as to the appropriateness of price would thus become irrelevant. It is disturbing that the Board appears unable to grasp, even now, the predicament in which they have placed themselves and ordinary shareholders.
Glass Lewis & Co., a prominent firm providing independent analysis and recommendations in relation to proxy contests, has recommended shareholders to vote FOR the removal of Mr. Bensh after analysing the arguments put forward by both sides. QVT again urges all shareholders to vote FOR both resolutions and to support subsequent efforts to gain back control of the Company from Silver Point Finance for the benefit of all ordinary shareholders.
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