Oil services company pledges action after uncovering fraud at overseas arm of Topaz Energy
Omani group Renaissance Services has defended itself against investor anger over late disclosure of troubles at its Topaz unit and said it will meet its short-term commitments as it focuses on turning around its troubled engineering unit.
The oil services company said on Monday it had uncovered evidence of fraud at an overseas arm of wholly-owned subsidiary Topaz Energy and Marine, which had been on the cusp of a $500 million London listing in March.
The news sent its stock down 26 percent this week and sparked questions about why Renaissance had not disclosed the financial misconduct, nor that Topaz's chief executive had resigned in May, until now.
"We have come in for a fair amount of criticism surrounding the senior management departure," Renaissance chief executive Stephen Thomas said in a call with reporters and analysts.
"We took a view that if we're not required to disclose it (immediately), that we would likely cause more harm than good."
Thomas took the helm of Topaz in May after its former chief executive Fazel Fazelbhoy left.
Renaissance is in talks with banks to secure refinancing for existing short-term and long-term loans and to meet potential one-off expenses, its chief financial officer said in the call.
"We are funded to meet our current requirements," CFO Vishal Goenka said in the call. He did not provide further details about the refinancing.
Renaissance, widely held by fund managers in the region, said the misappropriation of $2.9 million occurred over a period of six-and-half years at the unnamed overseas subsidiary.
"To put out a statement sounding like we were mired in a massive fraud problem would be misleading," he said.
Thomas said the financial misconduct began before Renaissance acquired Topaz in 2005 and was not uncovered during the original due diligence process.
Full disclosure and transparency is a rarity in the Middle East where corporate governance rules and guidelines are opaque and vary from company to company.
Renaissance's share price had been under pressure in the days leading up to the announcement, down 23 percent for the one month prior to its disclosure of fraud at its unit. Oman's bourse , by comparison, fell 8.4 percent in the same period.
Thomas said he could not explain the fall in stock price prior to the announcement but said media had reported Topaz CEO Fazel Fazelbhoy's departure in July, which could have had an impact on the market.
The stock rebounded 7.8 percent on the Muscat bourse on Thursday.
Thomas said Fazelbhoy's removal was not related to the discovery of fraud but rather due to strategic disagreements over Topaz's direction as a company and the pulled IPO.