This article first appeared in Corporate, The Edge Malaysia Weekly, on April 25 - May 1, 2016.

CLIQ Energy Bhd is considering legal action against Maybank Investment Bank Bhd (Maybank IB) as it believes its erstwhile principal adviser did not carry out its instructions in making submissions to Securities Commission Malaysia (SC) for its purchase of its qualifying asset (QA), sources say.

“CLIQ said Maybank IB did not submit the revised application on the final date of submission as instructed by the special purpose acquisition company (SPAC), and failed to do it again thereafter,” a source says.

CLIQ’s progress in filing the lawsuit is not known, the source adds. Also, the legal action might not be filed in the SPAC’s name, but rather its management’s, which holds a 20% stake through Best Oracle Sdn Bhd.

CLIQ’s management has applied for a judicial review in the High Court of Malaya against the SC, a move seen as a last attempt to get the deadline for the application of a QA extended and stop the SPAC from being liquidated. The judicial review application, sighted by The Edge, mentioned that Maybank IB did not submit the revised QA application. According to the document, CLIQ instructed Maybank IB to resubmit the application for its proposed acquisition to the SC — named as the first respondent (R1) in the judicial review — on Jan 22, being the last date for the revised submission.

CLIQ’s management admitted that the application did not meet the SC’s demand for Deloitte Corporate Advisory Services Sdn Bhd’s independent technical assessment. CLIQ had informed the SC the following week, explaining that it was difficult for Deloitte to compose the assessment on such short notice. According to the judicial review application, CLIQ assumed Maybank IB had submitted the revised application for the purchase of the QA.

The judicial review application said that the SC had not objected to independent expert Deloitte’s reliance on technical reports prepared by Tracs-Consult LLC, until two weeks before the deadline.

CLIQ also sent an email pleading with the SC to be given the chance to hear its case for Deloitte’s report pertaining to its “fairness report” and “the latest current oil projection from various organisations”.

“R1 responded to both the letter dated Jan 23, 2016, and the email dated Jan 25, saying that R2 (second respondent: CLIQ) could only correspond through the principal adviser Maybank IB, and that R2 has been confused with the outcome reached in the meeting dated Jan 15,” CLIQ’s management said in the judicial review application.

It stated that on Jan 28, Maybank IB had told CLIQ that it did not present the application to the SC as instructed, because Deloitte failed to come up with its assessment report in the way the regulator had outlined. CLIQ then again asked the investment bank to submit the application, but the latter did not do so.

Maybank IB tendered its resignation as CLIQ’s principal adviser on Jan 30. CLIQ’s management said in the judicial review application that with time slipping away, the SPAC could not find a replacement for Maybank IB.

CLIQ’s management contended that those who had invested in the SPAC’s warrants would incur losses given that the derivatives would be rendered worthless when it is liquidated. The management estimated that the loss could amount to RM189.28 million, assuming an average market price of 30 sen each for the warrants, which came free at the IPO.

In late April last year, CLIQ proposed to purchase a 51% stake in Karazhanbas Northern Field in Kazakhstan as the QA to graduate into a full-fledged business.

But the ringgit’s free fall, along with the decline in crude oil prices required the sale and purchase agreement (SPA) to be rejigged,  with Deloitte lowering the asset’s fair value by 11.5% in US dollars. However, CLIQ’s trust account had ringgit-denominated funds, which fell by over 20% against the greenback from the time the SPA was signed to CLIQ’s initial application for the asset purchase to the SC in July.

As such, CLIQ had to reapply to the regulator by Jan 22, after it was told to solve the fund shortage issue by doing a rights issue with warrants. The company, through Maybank IB, sent the application on Dec 14, 2015.

In the judicial review application, CLIQ’s management said after the revised submission was sent, the SC queried whether Deloitte’s opinion on its assessment report was without qualification, and that Deloitte’s estimates on 2P (proved and probable) reserves complied with independent technical expert Tracs-Consult’s reserve assessment report, which followed the guideline set by Petroleum Resources Management System.

On Jan 7, the SC sent a letter to Maybank IB saying that Deloitte has to conduct an independent review on all assumptions and technical evaluations by Tracs-Consult before the regulator could be satisfied with the fairness report.

When contacted, an SC spokesman says the regulator cannot comment on a matter pending in court. Maybank IB, too, says it is unable to comment given that the issue is under judicial review and that it is bound by confidentiality on client-related matters. CLIQ could not be reached for comment.

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