Spain sues Odyssey Marine

Nation files claims against three wrecks found by treasure hunters.

Published May 31, 2007

Spain filed suit Wednesday against Tampa's Odyssey Marine Exploration, and not just over a 17th-century shipwreck it promised to claim earlier this week.

Maritime lawyer James Goold said Spain filed claims against three wrecks the Tampa treasure-hunting company has discovered: an Italian-registered passenger boat found last year in the Mediterranean, an unidentified vessel located in March west of Gibraltar, and a 17th-century ship -- code-named "Black Swan" -- whose rich yield of 500, 000 silver coins this month drew international attention and nearly doubled Odyssey's stock price.

"Spain's legal action this week is based on the same legal principles that resulted in the return of all materials in the Juno and La Galga case, " said Goold, an attorney with Covington & Burling in Washington, D.C. In the Juno case, also argued by Goold, a U.S. court ordered a salvage company to return the treasures it removed from two 18th-century Spanish frigates without that country's authorization. Spain believes the so-called Black Swan may have sunk in 1641 while under contract with the King and carrying Spanish funds.

It's not clear how strong a legal case Spain may have. Odyssey spokeswoman Natja Igney said it is premature to assess the merit of Spain's Black Swan claim without knowing the ship's identity and added that Odyssey expects to reap a substantial salvage award regardless of who claims it. "You are playing right into the hands of lawyers that are trying to sensationalize a straightforward legal proceeding, and further encouraging this type of behavior, " she said.

But combined with Spain's involvement over a fourth shipwreck - its Andalucia region continues to stymie Odyssey's efforts to excavate a ship it believes to be the 17th-century British warship HMS Sussex, which may have sunk with cargo worth billions of dollars today - the country's multipronged interventions threaten to prolong Odyssey's cash crunch by delaying the conversion of treasures into actual revenues.

According to its most recent financial report, Odyssey began 2007 with just $2.4-million in cash and burned through $4.7-million during the first quarter. What saved it was a complex $6.6-million equity transaction with some of its top shareholders. Last June, Odyssey refinanced the $1.8-million mortgage on its Tampa headquarters with a $2.5-million loan.

Igney, the company spokeswoman, said Odyssey won't have to seek financing for several months, thanks to $7.7-million generated this month when a shareholder exercised some warrants. Still, cash crunches are nothing new at Odyssey, which seeks to be the first publicly traded shipwreck-recovery company to generate consistent earnings.

In prior years, the company sold stakes in specific wrecks or issued them to contractors in lieu of cash. The company's first major find, the U.S. Civil War-era SS Republic in 2003, generated an unprecedented $75-million in revenues that nevertheless were swiftly consumed by Odyssey's multiple search-and-recovery projects.

Under U.S. District Court rules, Spain has 20 days to issue a specific response to each of Odyssey's three shipwreck claims.

Odyssey's stock fell five cents Wednesday to $6.80 per share. Since leaping 81 percent to close at $8.32 on May 18, the day it announced its Black Swan find, the company's stock price has fallen 18 percent.

Scott Barancik can be reached at barancik@sptimes.com or 727 893-8751.