By Nick Worth
Prospect Global Resources Inc., parent company of American West Potash, announced in a Securities and Exchange Commission (SEC) filing on April 1 that it has failed to make a scheduled payment of more than $53 million to the Karlsson Group and that the company is negotiating to restructure the debt.
In full, the SEC filing reads: “Prospect Global is in active negotiations with The Karlsson Group Inc. to restructure our obligations to The Karlsson Group. We did not make a payment on March 30, 2013, of approximately $53.7 million (including accrued interest and fees). Failure to make the March 30, 2013, payment does not constitute an event of default under the note until 15 business days following delivery by The Karlsson Group of written notice to us. The Karlsson Group has not delivered a note of default to us; however, there can be no assurance that such negotiations will be successful nor that The Karlsson Group will not deliver a notice of default in the future.”
The SEC statement is signed by Prospect Global CEO Damon Barber.
Barber, who was Prospect Global’s chief financial officer, was appointed as president and chief executive officer on March 7, 2013, replacing Patrick L. Avery, the previous CEO.
Also on March 7, Avery and James Dietz resigned from Prospect Global’s board of directors and all associated committees. Dietz was originally designated as a director as part of a securities purchase agreement with Apollo Global Management in December 2012. The deal, which called for Apollo to purchase $100 million worth of Prospect Global stock, has since fallen through and Prospect Global has had to pay Apollo more than $9 million in termination fees.
The Karlsson Group was the owner of several leases in the Holbrook Basin and had originally signed a letter of intent with Passport Potash on Oct. 27, 2010, in which the two companies agreed to exclusive negotiations for a 30-day period to jointly develop a definitive cooperative agreement for exploration and development of potash acreage that would have brought about the development of a joint plan of operations.
On Feb. 11, 2011, The Karlsson Group joined forces with Prospect Global to create American West Potash. The Karlsson Group then sold out its share of the company to Prospect Global in August 2012.
As part of that deal, Prospect Global paid The Karlsson Group $6 million in cash, of which $5.5 million was to go toward the purchase price of 50 percent of American West Potash. Prospect Global also paid $19.5 million in cash and issued a promissory note for $125 million to The Karlsson Group, along with a warrant to purchase 5,605,834 shares of Prospect Global common stock for $4.25 per share and the right to receive one percent of the gross sales received by American West Potash from potash production from the real property over which American West currently has leases, licenses and permits for mining purposes, capped at $75 million.
In other Prospect Global news last week, a second SEC filing dated April 4 and again signed by Barber states that the firm’s executive vice president and chief operating officer Brian Wallace resigned from the firm effective April 2. The filing states Prospect Global’s management has no plans to replace Wallace.
“I had another opportunity come up that I really wanted to take advantage of,” Wallace told The Tribune-News. “My leaving had nothing to do with the payment to The Karlsson Group.”
Wallace said he would not comment on the missed payment.
Barber could not be reached for comment on the recent SEC filings.
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By Nick Worth