By Nick Worth
Prospect Global Resources, Inc., the parent company of American West Potash, made some big changes on March 7, including the announcement of a new president and CEO, and the termination of a financing agreement with Apollo Global Management.
According to a company press release, Prospect Global has named Damon G. Barber as president and chief executive officer, effective immediately. Barber replaces Patrick Avery.
Barber is described in the press release as “a veteran international mining and finance executive.” He joined the company in December 2012 as executive vice president and chief financial officer.
“I am extremely excited about the opportunity to lead the development of Prospect Global Resources and its Holbrook project,” Barber said. “The fundamentals of the project and the potash mining industry are tremendous for potential value creation. I am grateful that the board has given me this opportunity to build North America’s next potash company and mine.”
In a phone call, Avery would not comment on the change in leadership, but said he has offered to help the company in the transition in any way needed. He has reportedly been asked to stay on as a senior advisor, and has accepted that role. In financial news from the company, Prospect Global announced March 7 that the company and Apollo Global Management have “mutually terminated the previously-announced investment agreement.”
Under the terms of the financing agreement, Apollo would have purchased $100 million of seven-year 10 percent convertible second lien notes following the completion of the Definitive Feasibility Study, which is expected in the second quarter of 2013. The deal also hung on approval of the sale by Prospect Global shareholders. Apollo also had an option to purchase 26 million shares of Prospect Global common stock at $2.70 per share and another 22 million shares at $3.25 per share.
In a “Termination of a Material Definitive Agreement” filed March 11 with the Securities Exchange Commission (SEC), Prospect Global officials stated, “The Apollo financing was terminated as a result of concerns about Prospect Global’s ability to obtain the necessary shareholder approvals for the Apollo Financing.”
In the SEC filing, Prospect Global also disclosed the financing deal with Apollo would have affected Buffalo Management LLC, which currently has the existing right to receive two percent of Prospect Global’s gross revenues. If the Apollo deal had gone through, Buffalo Management’s share of revenues would have been cut in half, to the greater of one percent of Prospect’s gross revenues or one percent of the gross sales of its American West Potash subsidiary.
The Prospect Global statement goes on to say, “Buffalo Management is controlled by Chad Brownstein, our (Prospect Global’s) executive vice chairman. Barry Munitz, our board chair, and Patrick Avery, our former chief executive officer and a former director of Prospect Global, own minority non-voting interests in Buffalo Management.”
Munitz and Avery own 15 percent and 10 percent of Buffalo Management, respectively.
As a result of the cancelled deal, Prospect Global now has agreed to pay $9.6 million to Apollo Global Management.
So far Prospect has paid $750,000 to Apollo as a termination fee and another $2.16 million for expenses the fund company has incurred in connection with the financing deal. Prospect also issued Apollo two promissory notes for a total of approximately $6.75 million at an annual rate of 11 percent, which mature on Sept. 3 of this year.
By Nick Worth