New York -- (MARKET WIRE) -- March 22, 2007 --
Europa Partners Limited
22nd March, 2007
RESPONSE TO CARDINAL RESOURCES' LETTER TO SHAREHOLDERS
Qvt 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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