Jul 2009 Financial News

AIC locks up investor agreement - Columbus offer closes, bid evaluations begin

Jul 24, 2009

AIC Barbados Limited (AICB) narrowly missed being called into default by its bondholders, whose agreement were secured individually to wait out the sale of Michael Lee Chin's stake in Columbus Communication to pay down US$36.7 (J$3.3 billion) in overdue debt.

On Monday, a day ahead of a special meeting of some 100 of AICB's note-holders in Kingston, the trustee of the AICB notes, Pan Caribbean Financial Services (PCFS), issued an advisory cancelling the July 21 meeting, saying a vote in favour of extending the maturity date for the bonds to November 27 had been secured from all who would have been eligible to attend and vote at the meeting.

It takes pressure off Lee Chin for now, who stood the risk of losing 35.6 per cent of his 68 per cent stake in National Commercial Bank of Jamaica - representing the more than 877.5 million of the bank's shares pledged as security for the notes - had his debt holders voted against a second extension of the bond's maturity date.

Also exposed is NCB Towers, on which a second mortgage has been granted to PCFS by AIC Jamaica Limited. AICB values the 160,000 -square foot towers at $2.25 billion, while the 35.6 per cent of NCBJ was at Monday's trading prices worth $11.4 billion.

And it gives the billionaire investor enough time to wrap up the sale of his Columbus shares, on which the bids closed at 5 p.m. Monday.

"The adviser has notified us that offers have been received," Robert Almeida, head of AIC Global Holdings, told Wednesday Business, sidestepping a query on just how many offers Lee Chin got.

"They will be assessed before final decisions are made."

PCFS said it was "not at liberty to share" the information.

RBC Capital Markets of New York, a division of Royal Bank of Canada, was due to begin evaluation of the bids Tuesday, but expectations are that it could take a week or more to settle on a preferred buyer, and perhaps up to a month after that to negotiate the sale, said PCFS.

Five of the notes were originally due in March and April, but unable to pay, Lee Chin requested an extension to June 11. He came back to bondholders on June 5 to seek a further extension to November 27, but got a 'yes' vote from only 91 of 101 of the investors - the extension could only be granted on a unanimous vote - forcing AICB and AIC Global to make individual sales pitches to convince the holdouts that it was in their interest to allow the Columbus share sale to proceed.

Indeed, were a default to be triggered, one of the cautionary notes sounded by PCFS back on June 8, was that the acquisition of such a substantial stake in NCBJ would require Bank of Jamaica approval for the transfer of ownership.

Lee Chin is reportedly hunting between US$200 million to US$300 million for his Columbus shares, an unstated portion of which will accrue to AICB - the entity in which some 61.85 per cent of NCBJ ownership is reposited.

Robert Almeida, head of AIC Global Holdings, says "some offers" have come in for Michael Lee Chin's Columbus shares.

"AICB's expectation remains that the proceeds, whether partial or full, will be more than sufficient to repay the noteholders and that closing will take place within the period agreed upon with note-holders," said Almeida.

Said PCFS Monday: "The trustee reminds relevant note-holders," PCFS said Monday, "that AICB has assigned its share of the proceeds from the sale transaction to the trustee for purposes of monies due under the notes being paid out in full."

A deal, if the parties agree on terms, would, on that timetable, likely be reached towards mid- to late September, around the same time that the next interest payment at 13.25 per cent per annum on the bonds become due.

The NCBJ shares are held in trust by PCFS, which says dividend - amounting to J$87.7 million or 10 cents per share in April - are used to partially service the interest payments on the bonds, with the rest financed by AICB.

PCFS said Monday that the Columbus sale proceeds would pay off both the principal and interest due.

For the bonds already past due, the September 11 interest payment would cost AICB an estimated US$1.2 million (J$108.2 million).

Jamaican investors hold some $108.4 million of AICB debt. Another J$500 million of the notes (US$5.6 million) mature in less than two weeks, on July 30; another US$17.3 million become due on December 15, and the remaining US$39.5 million over 2010 and 2011.

(I USD = 89 JMD)

Article by: Lavern Clarke, Business Editor lavern.clarke@gleanerjm.com
Source: Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20090722/business/business4.html
Date Published: Wednesday July 22, 2009