Agility, once an undisputed star of the Kuwait SE, has been suffering from a vicious financial death spiral initiated by fraud accusations from its biggest customer: the US government. It all got started crumbling in mid-November 2009 when Kamal Mustafa Al-Sultan acted as a whistleblower and filed a lawsuit against Agility which was later charged with fraud and conspiracy alleging that it overcharged the U.S. Army on $8.5 billion worth of contracts to provide food to soldiers in Iraq, Kuwait and Jordan. The indictment is a big deal since it prevents Agility from bidding for US government contracts during the legal proceedings which constitute 75% of its EBIDTA (Cheuvreux estimates). Needless to say, Agility’s shares took a severe dive by more than 50% from the peak and failed to recover. Lacking further contracts and clear outlook, the company has been laying-off employees during the past few months. Shares of Agility currently trade at 600 fils and haven’t crossed the 700 fils barrier since the fraud accusations.
Agility is definitely desperate to settle with the US government. There were several attempts to postpone the court, but no settlement has been reached yet with the US government. Reports suggest that the U.S. authorities want Agility to pay up to $750 million for the settlement. This sum is far-fetched for Agility as the company’s current market capitalization stands at approximately $2 billion. Kuwaiti daily newspaper Al-Jarida suggests that Agility wants to pay between $300 million to $500 million in compensation. Pending reaching a settlement, Agility requested a trading halt on its shares and permission from the Kuwait SE to delay the release of its financial results until Tuesday. Further Al-Jarida elaborated that negotiations were around a schedule for repayment and circulated on whether Agility will get new contracts with the U.S. military.
There are fears Agility doesn’t reach settlement and it loses on 75% of its EBITDA for a while as court cases take long durations to finally unfold. T here is a desperate need for settlement, but how much is a good deal or a bad deal?
Previous Related Articles:
1. Agility’s “Long & Complex Case” Unsettled Yet Again
2. Agility Postpones Hearings as it Seeks Settlement
3. Agility Indicted with $8.5B Fraud by US Government
4. Agility Fraud Case Implications
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Loading ...Tags: Agility, Agility Fraud, Court, Kuwait, PWC Logistics, Settlement, Sultan, US Government
that dispute on overcharging was there since 2007/2008. Kamal Alsultan, has always bee against Agility, since they basically booted him out once they got the first contract in 2004.
anyways, the U.S army has all the power. and agaility has really no power against it. besdes, there is a massive shift of units from iraq, biggest since WWII !!….. so if agility wants a piece of that, they better settle at the U.S army’s terms……
I suppose what goes around comes around .. somehow, the relationhip between Agiltiy and Sultan Center has always been very fishy…….and on top of that, they used to keep the volume discount for themselves rather than passing it to the customer, who is really the reason for this discount!
like little kids at Eid, they wasted their cash on stupid acquisitons, which they thought they could handel…..they abused the relatinship with the Kuwaiti government when they raised the rates in the Junk Yards. Instead of thanking them for giving them public lands at dirt cheap prices (cheapest public lands in the world as per the World Bank!!)
I suppose thats what you get when the management is so greedy and not sraightforward
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Although there are some reservations on Agility’s approach, let us not put all the blame on them. These types of contracts are a complex pandora box one doesn’t want to open. Their only problem is they don’t have any bargaining power with the US government and the US government is leveraging on that.
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According to the latest news, Agility will postpone the release of its 2009 financial results until April 11. In a statement on Tuesday, Agility stated that it was waiting to see “whether or not it can resolve a legal dispute with the U.S. government.”
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@ Keynesian:
“Their only problem is they don’t have any bargaining power with the US government”
you make it sound like they are the victims. trust me on this, they were overcharging. Specifically on these items I listed above.
They have top contract specialists at agility, the contracts are not the problems. the problem is the company’s (management’s) ethical approach to dealing with its customers…… in this case it’s the guerrilla
they wasted all their cash and now they have to give back a lot of the profits they made from these contracts…….sweet justice
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