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A Saudi Arabia-backed investment fund is liquidating the holding company of a United Arab Emirates oil storage company that has been plagued by financial reporting issues since going public in New York.
Brooge Energy Limited listed its shares on Nasdaq in 2019 through a merger with a special acquisition company that gave it a market valuation of more than $1bn.
The operator of oil storage facilities in the emirate of Fujairah had the backing of powerful Middle East investors including Sheikh Mohammed bin Khalifa bin Zayed Al Nahyan, the son of the previous president of the UAE, and claimed in its prospectus to have signed big contracts with unnamed international trading companies.
But Brooge subsequently had two Big Four auditors resign, restated tens of millions of dollars of improperly booked revenue from a related party and became subject to an examination of its financial statements from the US Securities and Exchange Commission.
Last month, an investment fund managed by Bahrain’s Asma Capital placed Brooge’s majority shareholder BPGIC Holdings into liquidation over unpaid debts. Asma is backed by Gulf sovereign entities such as Saudi Arabia’s Public Investment Fund, the Islamic Development Bank and Bahrain’s finance ministry.
BPGIC Holdings borrowed $75mn from Asma’s fund in 2019, but never paid any interest on the debt, according to Cayman Island court filings related to its insolvency, racking up more than $30mn of unpaid interest.
BPGIC Holdings owns more than 85 per cent of Brooge Energy’s listed shares. The holding company was in turn owned by Salman Dawood Salman al-Ameri and Sheikh Mohammed bin Khalifa bin Zayed Al Nahyan.
Brooge was part of a wave of foreign groups that seized on the US boom for special acquisition companies to list their shares in New York.
Brooge last week announced that two restructuring advisers from Alvarez & Marsal had been appointed to its board as a result of BPGIC Holdings being placed into liquidation. Alexander Lawson and Guy Wall, the Alvarez & Marsal partners acting as official liquidators, said that the process would “have no adverse impact on the company’s performance” and that Brooge has a “solid business foundation and state-of-the-art facilities”.
Brooge declined to comment. Asma Capital did not respond to requests for comment. A lawyer who represented BPGIC Holdings did not respond to requests for comment.
When Brooge listed its shares, it disclosed that its auditor EY had identified “material weaknesses” in the company’s “internal control over financial reporting”. Brooge also disclosed that it relied on an entity called Al Brooge International Advisory (BIA) for the entirety of its revenue. While BIA had been a related party, Brooge said that one of its shareholders was planning to divest her stake in the company, making it independent.
EY resigned as Brooge’s auditor in 2020 and was replaced by PwC. Brooge’s audit committee then began an internal probe into the company’s accounting practices in 2022, in response to an SEC “examination” of its financial statements. In August 2022, Brooge announced that its audit committee concluded that its financial statements “should no longer be relied upon” due to “revenue recognition” issues.
In December 2022, PwC resigned as Brooge’s auditor after “disagreements” on matters of accounting. In a letter to the SEC written in January 2023, PwC stated that “likely illegal acts” had come to its attention that would “have a material effect on the financial statements”. Brooge said at the time that it “strongly disagrees with PwC’s opinions” stated in the letter.
Brooge appointed UAE based accountancy firm Affiniax AAS Auditors to replace PwC and “reaudit” its previously issued financial statements. As a result, Brooge reclassified $74mn of funds received from BIA between 2018 and 2020 that had previously been booked as revenue as a liability. Brooge now also considers BIA a related party.
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