Oswal's Burrup dream goes belly-up

While developing plans about a decade ago for the $700 million ammonia plant that would secure his fortune, the Indian entrepreneur Pankaj Oswal apparently eschewed an office for a bench on Perth's St George's Terrace, opposite a Singapore Airlines office. The rationale was, if the plan to build Burrup Fertilisers failed, he could grab a ticket and fly home to India.

Oswal flew home over the weekend after receivers were appointed to Burrup Fertilisers and there is growing uncertainty over what exactly will be left for him in Australia once assets are sold to pay debts to ANZ totalling $800 million.

The receivers have seized Oswal's majority stake in Burrup - severing Oswal's ties with the business he built over the past decade - and have security over all of the company's assets.

More than half of the debt is tied to Oswal's private interests, which means he faces losing the $70 million home he is building in Perth dubbed "Taj Mahal-on-the-Swan".

ANZ appointed receivers, led by PPB's Ian Carson, late on Friday, citing "default events" in relation to its loans and "financial irregularities". Investigations were already under way into allegations that company funds were used to pay the bills of Oswal's private interests, which he has denied.

It is understood the final straw for ANZ was an attempted boardroom coup at Burrup on Friday by a minority shareholder, the Norwegian fertiliser giant Yara International, which made it clear the toxic relationship between Yara and Oswal was escalating out of control.

Oswal, who denies the claims against him, flew out of Perth to see family in India and will return next month, a spokesman said.

In a prepared statement, Oswal welcomed ANZ's "intervention" in his dispute with Yara. "We will co-operate fully to facilitate a mutually beneficial outcome," he said. "The attempts by the bank to broker a resolution to this frustrating and unfortunate situation is crucial."

The receivers are expected to sell Oswal's 65 per cent interest in Burrup to recover ANZ's $360 million loan to the business, which Carson describes as "very profitable". The PPB receivers are not responsible for recovering the $440 million owed by Oswal's private interests.

The Australian Securities and Investment Commission is monitoring the receiver's investigation into Burrup's accounts. It is understood that complaints were made to ASIC last month about alleged financial irregularities at Burrup, but the regulator declined to take action at that time.

Carson told BusinessDay yesterday that his team is now in charge at the company and are "working very closely with Burrup's management to ensure the company runs smoothly".

Tap Oil, which is part of a venture providing gas to Burrup, told the stock exchange yesterday that "Burrup is up to date with its monthly payment obligations".

Yara has indicated its interest in buying Oswal's stake if the price is right. Yara has an off-take agreement which guarantees it receives most of the ammonia Burrup produces.

Signs of trouble between the two shareholders became public in September when BusinessDay revealed Yara had gone to the Federal Court twice to prevent Oswal's attempts to convert the unlisted Burrup from a public to proprietary company.

The change would restrict what information Burrup would have to make public including related party transaction provisions. Yara executives cited transparency as one of their major concerns at the time.

Weeks later Burrup said it would investigate allegations published in BusinessDay that company funds were used to pay the bills of a shipping company related to Mr Oswal. Oswal denies the allegations.

Cost concerns were also an issue, with Yara's latest financial results reporting that Burrup made a loss for the first nine months of this year.

It culminated last month in a Federal Court judgment allowing Yara to investigate Burrup's financial accounts. The judgment revealed Oswal had offered to repay $22 million he had received from Burrup "on terms, without explanation or admission of liability".

The court document said the money was "apparently" paid to Oswal in apparent satisfaction of certain project loan asset swap obligations owed by him to the ANZ Bank. The judgment said solicitors for Burrup "have recommended an urgent, impartial and independent investigation be conducted into this matter".

The judgment from Justice Michael Barker cited these issues, as well as the late payment of Yara's dividend from Burrup and the non-lodgment of financial accounts, as satisfying him that these were proper concerns held in good faith by Yara and justified the inspection order.

"I have little doubt that the applicant is acting in good faith," Justice Barker said, while adding he was not ruling on the accuracy of the allegations. "It entertains real concerns that there are a range of unexplained irregularities in the management of the company, including the financial management of the company and the related concerns about contravention of the Corporations Act in relation to the non-lodgment of returns."

That same week, ANZ received a court order ensuring it had access to confidential documents lodged with the court. "As any lender would, ANZ was interested to know the background of the dispute between Burrup Group's shareholders," a spokesman for ANZ told BusinessDay at the time.

After appointing its receivers on Friday, ANZ said that "based on its current understanding", it expects to make a full recovery of the funds owed to it.