At the moment, Fariyal Khanbabi holds the role of Group Chief Executive Officer and Executive Director at Dialight Plc. Fariyal Khanbabi is a member of the Institute of Chartered Accountants in England and Wales as well as serving on the board of Dialight Europe Ltd.
The University of Leeds awarded Fariyal Khanbabi a bachelor’s degree.
She formerly held the positions of 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 for Blue Ocean Group Ltd., where her company had filed for bankruptcy.
Come on, let’s continue to learn more about the legal dispute involving Fariyal Khanbabi.
Fariyal Khanbabi: Involvement in the case of Security Ligation of Britannia Bulk Holding
Let’s start at the beginning and discuss what occurred at Britannia Bulk Holdings before moving on to the case study.
The shipper of dry products, Britannia Bulk Holdings Inc DWT.N, announced on Tuesday, October 28, 2008, that it would report a loss for the third quarter and that it is contemplating several options, such as dissolution or bankruptcy protection.
What is Bankruptcy?
Through the legal process of bankruptcy, individuals or other entities that are unable to pay their creditors back can seek partial or complete relief from their debts. Bankruptcy usually happens by a court order that is frequently requested by the debtor.
“A significant net loss” for the quarter resulted from an unanticipated abrupt reduction in the amount of dry bulk shipping demand and a resulting drop in prices charged for shipping services. Additionally, according to a press release from Britannia, the business spent more to keep its cargo vessels than it made by renting them out to clients.
The firm, which moved commodities into and out of the Baltic area, warned that there was a “very high risk” of default for the loan facility it has with Lloyds TSB Bank Plc and Nordea Bank Denmark A/S.
The organization was in talks with lenders, but it claimed that there can “be no guarantee that an agreement of the issues underlying the lending institution will be reached.”
In its statement, the company stated that it was exploring its options, including dissolution or protection under applicable insolvencies or bankruptcy laws if it was unable to work out an agreement with the lenders.
Fuel Hedge
Britannia has also been harmed by an unexpected decrease in fuel prices.
According to the organization, a bunker fuel hedge it entered into in the third quarter “was currently not competitive because it is hedged to prices that were substantially higher than the current market price of bunker fuel,” it added. The company also predicted that the aggregate bunker fuel hedging expenses for the quarter “will be significant.”
Britannia of Fariyal Khanbabi has recruited corporate consultancy company AlixPartners to assist it in reducing expenses and saving money while providing advice on talks with lenders and business partners.
Before trading was suspended on the New York Stock Exchange, shares of Britannia of Fariyal Khanbabi were last trading for 96 cents, down 94 cents. Shares had decreased to 26 cents in midday trading of the composite market, which was not interrupted.
Fariyal Khanbabi: Case Summary
According to the combined lawsuit Edward Wahl and others have filed against Britannia Bulk Holdings, Inc. as a class action under the Securities Act of 1933.
A public offering of common stock by Britannia was held on June 17, 2008, and the complaint claims that the Registration Statement and Prospectus, which served as the Offering Documents, included deceptive information.
The major issue concerns Britannia’s usage of forward freight agreements (FFAs), financial arrangements used as a hedge against the cyclicality of charter rates in the transport sector.
Plaintiff asserts that Britannia misled or omitted two crucial facts about the usage of FFAs: (1) that FFAs were utilized to hedge against increases in charter rates as well as decreases; and (2) that the Company entered into FFAs for speculative reasons. According to the plaintiff, these alleged misunderstandings and omissions affected investors’ ability to evaluate Britannia’s operations and were material.
The defendants include Britannia, its CEO Arvid Tage, Fariyal Khan four additional directors and senior officials (referred to together as “Individual Defendants”), and the four underwriters for the initial public offering (referred to collectively as “Underwriter Defendants”).
Each set of defendants makes the claim that the Offering Documents’ statements were accurate or not materially deceptive. Furthermore, they contend that the case ought to be dismissed since the affirmative defense of negative causation is clear from the document itself.
With the sole exemption of the Section 15 claims against Fariyal Khanbabi and Arvid Tage, the court grants the defendants’ requests for dismissal. Those claims went forward.
According to the data gathered, it appears that on June 17, 2008, Britannia of Fariyal Khanbabi carried out an initial public offering (IPO) of 8.33 million shares of common stock. With each share at $15, the total funds (before underwriters’ discounts) came to about $125 million.
The initial public offering (IPO) was registered with the Securities and Exchange Commission (SEC) and adhered to the rules outlined in a registration statement on Form F-1, which was first filed on or around June 4, 2008. On June 13 and June 16, the registration statement was subsequently changed. A request for information on Form 424B4 also went into force on June 18.
Several officials and directors of Britannia, including someone named Tage and the Individual Defendants, signed the prospectus, which contains crucial details about the company and the offering. This shows that these people accepted accountability for the truthfulness and thoroughness of the information presented in the prospectus.
Four underwriters helped to facilitate the offering during the IPO process: Dahlman Rose Company, Banc of America Securities LLC, Goldman Sachs Co., and Oppenheimer Co. Inc. Britannia received assistance from these underwriters in distributing the stock to investors. They got more than $8.7 million in fees for their participation in the IPO as compensation.
On June 18, 2008, Britannia’s stock started trading on the New York Stock Exchange after the IPO was finished under the ticker symbol “DWT”. As a result, customers and investors were able to purchase and trade stocks of Britannia on the trading floor.
A company’s initial public offering (IPO) is a big deal because it gives the general public the chance to participate in the firm’s stock and helps the organization generate money for operations and growth. Market conditions, investor interest, as well as the business’s fiscal health and prospects, all influence how well an IPO performs.
Fariyal Khanbabi: Forward Freight Agreements
In its IPO paperwork, Britannia, a firm owned by Faryal Khanbabi that intended to list on the stock market, stated that it used dry bulk forward freight agreements (FFAs) as an economic hedging tool to mitigate the risk associated with charter-rate volatility.
FFAs featured contracts for theoretically fixed voyages at fixed rates, letting parties insure against future changes in the market price for shipping cargo along particular trade routes.
Britannia of Fariyal Khanbabi had signed eight FFAs in the three months up to March 31, 2008. The corporation concluded an additional twenty-nine FFAs in the following three months that ended on June 30.
In its Form 6-K quarterly report dated August 4, 2008, Britannia stated that these partnerships had proven to be quite profitable.
In the three months that ended on June 30 and the six months that ended on June 30, respectively, the business realized net financial benefits from its FFAs of $7.9 million and $15.7 million. About two weeks after the IPO date, this encouraging performance was seen.
The company of Fariyal Khanbabi disclosed its exposure to potential risks connected to charter rates and employment of chartered-in vessels in the “Qualitative and Quantitative Disclosures About Market Risk” section of the Offering Documents.
The corporation uses dry bulk forward freight agreements (FFAs) as financial hedges to control these risks brought on by shifting market conditions. These FFAs are used by their shipping firm to hedge identifiable ship or cargo locations and anticipated transactions.
It is crucial to remember that none of the financial derivatives, including FFAs, meet the requirements for hedge accounting. Therefore, any net changes in derivative liabilities and assets are immediately reflected in the company’s operations for the current quarter.
The reported net income of the corporation may see considerable variations from one quarter to the next if FFAs are used for hedging activities.
The possibility for counterparties to breach the terms of their contracts in FFAs, which may result in trading losses, is a substantial risk the company confronts. The Offering Documents emphasize the potential for trading risks in FFAs, and these losses could hurt the company’s earnings.
The report, taken as a whole, demonstrates the company’s efforts to control financial risk through FFAs but also recognizes the inherent economic hazards and unpredictability associated with employing these derivative instruments. When assessing the investment opportunity, investors and others with interests should take the company’s financial performance into account.
Fariyal Khanbabi:IPO-Related Developments
Britannia acknowledged having serious financial problems as a result of the increasing global crisis, which has cut interest in raw materials and resulted in falling charter prices in the dry bulk shipping sector.
The company had planned to report a sizable net loss for the three months that ended on September 30, 2008, with the large decline in dry bulk charter rates during that time being the main cause.
Several additional elements also played a role in the losses, such as:
Britannia boosted its chartered-in capacity at a time when the market’s demand for capacity was noticeably declining.
Financial difficulties were exacerbated by the uncompetitiveness of a recently negotiated bunker fuel hedge.
The corporation suffered losses from FFAs that were bought in July 2008 but weren’t utilized as financial hedges to safeguard specific ship or cargo locations.
Compared to if they had adhered to their historical practice of employing FFAs as hedges, this left the company more vulnerable to declining charter rates and decreased demand for dry bulk shipping services.
For the three months ending September 30, 2008, the business anticipated realizing a sizeable realized loss associated with the purchased FFAs. The fourth quarter of 2008 was the intended start date for the monetary settlement for these FFAs, which would continue throughout 2009.
The company’s Board of Directors decided to hire an outside consultant to look into how it entered into these FFAs to better understand the choices and actions that caused the losses. This decision was made by an independent committee of the board.
Fariyal Khanbabi: Procedural Background
The plaintiff filed a complaint in May 2009 on behalf of every person who purchased Britannia stock through the company’s initial public offering (IPO) and experienced financial loss as a result. Britannia was charged with breaking Securities Act Sections 11, 12(a)(2), and 15.
It asserts that the Offering Documents supplied by Britannia of Fariyal Khanbabi were deceptive omitted crucial details, and contained false assertions of material facts.
The defendants listed in the complaint are Britannia, four underwriter defendants, and several people connected to the business, including John Sinders, Jens Fehrn-Christensen, and Soren Halsted (Directors), Arvid Tage (Chief Executive Officer and Chairman of the Board of Directors), Fariyal Khanbabi (Chief Financial Officer and Director), and Britannia.
However, under Section 15, only Tage and Khanbabi are officially named as defendants. It’s vital to note that the complaint focuses on “innocent and/or negligent conduct” rather than making claims of fraud. All defendants, except Britannia, submitted motions to dismiss the complaint on June 12, 2009.
Fariyal Khanbabi: Case Conclusion
On June 12, 2009, the Defendants submitted motions for the dismissal of the Complaint in a court proceeding. The claims brought under Section 15 against people called Tage and Fariyal Khanbabi were left unaffected by the court’s decision to grant the Defendants’ petitions to dismiss the Complaint.
This indicates that the case will not go on except for the particular claims regarding Tage and Fariyal Khanbabi, which the court will still evaluate. The issued statement leaves out additional information regarding the case and the justifications for the court’s ruling.
Wrapping Up
Finally, we can claim that Fariyal Khanbabi, along with other corrupt individuals, was a part of the bankruptcy. I’ve now told you the entire tale, which began in 2008 and continued until the lawsuit was filed. You may follow the mentioned link to study more about Fariyal Khanbabi:
