Apr 2009 Financial News

Flow sale advanced, Lee Chin tells creditors - NCB Towers added to pledged NCB shares

Apr 03, 2009

Billionaire investor, Michael Chin, on Wednesday told more than 100 anxious Jamaican investors holding promissory notes from his AIC Barbados Limited, that a deal is close for sale of the Barbados-based fibre optic cable business, Columbus Communications Inc.

Lee Chin plans to use the proceeds to liquidate the Jamaican debt by June 11.

Columbus operates in Jamaica under the brand name, Flow.

At the same time, faced with the need to put up additional shares in National Commercial Bank (NCB) - initially used to back the AIC bond issue - to cover a US$60 billion collateral shortfall on the instruments, Lee Chin has offered instead to pledge all his stakes in Columbus as well as the two NCB towers located in New Kingston.

Estimated value

Market sources say Lee Chin's share holdings in Columbus are valued anywhere between US$130 and US$230 million.

But AIC suggests it is closer to US$300 million, saying: "The estimated value of Columbus is US$1.5 billion and AIC Barbados owns about 20 per cent."

Lee Chin's Caribbean equity fund also owns a piece of Columbus.

Earlier in February Lee Chin, in an exclusive interview with the Financial Gleaner put the value of Columbus at "close to US$ 1 billion" while AIC's Caribbean point man, Robert Almeida, around the same time, estimated AIC's holding in Columbus at "between US$200 and US$300 million."

Information posted on Columbus' website listed the company's total assets at January 1 this year, at US$1.1 billion and total capital investments to 2010 of US$700 million.

Columbus has several operating subsidiaries including Columbus Jamaica Limited, FibraLink Jamaica Limited, Cable Bahamas Limited, Columbus Trinidad Limited and Columbus Networks Limited.

All are private companies with the exception of Cable Bahamas, which trades publicly on the Bahamas Securities Exchange.

Lee Chin's disclosure to noteholders at a meeting at the Hilton Kingston hotel Wednesday afternoon, placed a US$20 million to US$25 million value on the Towers, which now house several business including Lee Chin's Jamaica corporate offices, a branch of NCB, the Justice and National Security ministries, Attorney-General's chambers and the Students' Loan Bureau.

"I think this is a good deal for the note holders," Phillip Armstrong, deputy chief executive officer of Pan Caribbean Financial Services, the trustee for the AIC commercial paper told the Financial Gleaner.

Prime real estate

While the roughly 150 bondholders have seven days in which to sign on to the new assurances from the AIC boss, it is expected that they will agree to the new arrangement that effectively puts ownership of a sizeable portion of Columbus and prime real estate in their hands, along with the 877 million NCB shares initially pledged to back the commercial paper when they were first launched around 2003.

Lee Chin owns 1.68 billion shares or 68 per cent of NCB.

The terms of the issue guarantee investors collateral backing of at least 1.75 times the value of the notes. With a depressed stock market, which saw listed NCB shares

trading at $12.35 on Wednesday, and sharp devaluations of the Jamaican dollar against the US since then, the collateral value shrunk below the minimum to around 1.2 times the instruments.

At Wednesday's share price, the 877 million pledged NCB shares would have been worth just about J$10.8 billion or J$4 billion - less than the roughly J$15 billion required for principal and interest payments on the notes.

While Lee Chin's declared valuations on the new assets being pledged put the total collateral over the top of the minimum requirement, some cagey investors are said to be pressing for an independent valuation.

Negotiations

Late yesterday Pan Caribbean said a valuation had been commissioned and would be ready by today, April 3.

Meanwhile, there is still no word from Lee Chin or AIC Barbados that the buyer now in advanced negotiations to pick up Columbus, is Mexican billionaire, Carlos Slim, whose América-Móvil telecommunications business recently entered the Jamaican mobile market with its Claro brand, having bought out Centennial Digital two years ago.

Investments

Claro operates in many of the 21 countries in the Caribbean and Latin America, where Columbus now operates, backed by an extensive fibre optic infrastructure. It is this technological backbone, with its potential to enable Claro to firmly stamp its presence in the mobile, landline and Internet markets of region, that América-Móvil is believed to most interested in. The company did not acknowledge requests for comment.

According to its website, Columbus Communications Inc says it has 410,000 customers and employs 1,700 workers in its group. The company describes itself as, "a Barbados-based international business corporation that holds investments in retail broadband telecommunication providers based in The Bahamas, Jamaica and Trinidad, and wholesale broadband networks throughout 21 countries in the greater Caribbean and Latin American region."

As a diversified telecommunications company, it lists its core operating business as "providing cable television services, high speed internet access, digital telephone and internet infrastructure services (retail) and, the development of an undersea fiber optic cable network as well as the sale and lease of the telecom capacity provided by the network (wholesale)."


Source:
Huntley Medley, Contributing Editor - Business
huntley.medley@gleanerjm.com
Jamaica Gleaner
Friday April 3, 2009

http://www.jamaica-gleaner.com/gleaner/20090403/business/business6.html