Financial crisis precludes new directors

Financial difficulties at Bula Resources have led to the withdrawal of a proposal to appoint two new directors.

The company chairman, Mr Tom Fitzpatrick, said yesterday that if a share placing currently being negotiated fails to go ahead, the company may look to its shareholders for support.

He said the company was hoping to raise "something in the order of £1 million". He was keeping a close eye on the situation and "if it becomes critical and dangerous" he would inform the shareholders.

"In the absence of any other funding opportunity, shareholders will have to decide what to do. It's your business. I'm giving you the harsh cold facts. It is as it is." Mr Fitzpatrick was speaking at an e.g.m held to allow shareholders discuss the McCann Report into the company's disastrous deal with Mir Oil. The prospective new directors, Mr Russell Herbert and Mr David Hooker, have "indicated that they are prepared to reconsider their position upon adequate funding becoming available to the company", Mr Fitzpatrick said.

He told the meeting that the company's difficult funding situation could prevent it complying with an order of the London High Court that it provide a banker's guarantee for £250,000 sterling by November 19th, to provide security of costs to a firm of solicitors, Gouldens, which is being sued by Bula.

The action is in relation to an oil deal in Russia between Bula and two Russian companies, the Russian Corporation and Aki-Otyr. Bula lost £8 million as a result of the deal. Gouldens provided legal advice to the Irish company.

Shareholders were told Bula spent £240,000 in legal fees in the Gouldens case last year, and £127,000 in the first half of this year. Mr Donal Roche, of Matheson Ormsby Prentice, said it would be difficult to suspend the proceedings without risking losing them.

Some shareholders called for the suspension of all legal actions. The company is currently involved in litigation against its former chairman and chief executive, Mr Jim Stanley. So far it has spent between £50,000 and £75,000 on that case. Mr Ivan Walpole, financial director, said it would be "unwise to speculate" as to the possible future costs of all actions.

Mr Fitzpatrick said "the group's already low level of costs have been reduced and all future expenditure is under detailed review." Mr Pat Mahony, managing director, said he was hopeful that a deal to secure funding could be put in place "but we are running against a deadline".

Asked if the company has "much time left", the chairman said he could not give a precise answer. "We are battening down the hatches. We have to try to ride this out," he said.