Jul 2011 Financial News

Lascelles shareholders swallow bittersweet concoction. US$340 bondholder payment looms this month

Jul 10, 2011

LOCAL conglomerate Lascelles deMercado had some good news for shareholders last Friday, declaring an interim dividend payment of $5.50 per ordinary stock unit and a special dividend of $25.70 per ordinary share unit, both payable to ordinary stockholders on record as at July 21, 2011 and payable on July 27,2011. The X-Date is July 19,2011. This means that Lascelles would have made a total payout of US$35 million.

The group that producers both J Wray & Nephew and Appleton rums was acquired by the Trinidadian companyAngostura in 2008 for US$676 million which bought it 86.87 per cent of Lascelles'common stock. Angostura is a subsidiary of Lawrence Duprey's now bankrupt CL Financial.

In order to acquire Lascelles, Duprey raised external debt financing in the amount of US$450 million which bondholders are looking to be fully realised. But with CL Financial for all intents and purposes broken and moribund, Duprey has no option but to turn to Lascelles to honour his obligations.

For the second quarter ended March 31, 2011 Lascelles deMercado saw net profits increase by 12 per cent to $721.4 million compared to the corresponding period last year. Shareholders saw earnings per stock unit move from $6.72 at the end of March 2010 to $7.51 at the end of the second quarter 2011.

Revenues over the period under review were flat at $6.4 million with only two of the Group's major segments showing growth. Its liquor arm posted revenues of $4 billion. Despite the flat overall sales, Lascelles achieved a four-per cent increase in operating profit to $676 million. Administrative, marketing and selling expenses increased by 17 per cent to $2.3 billion but the cost of operating revenue fell by 9 per cent to $3.4 billion.

One of the concerns some board members had was that Lascelles would be plundered to make amends for the failure and demise of CL Financial. In March of this year it was announced that three Jamaicans would be stepping down from the Board of Directors, namely: former managing director William McConnell credited with taking the Group to great heights, former Group Finance Director Anthony Bell and investment banker with Deutche Bank Jason Abrahams who was instrumental in structuring the Lascelles acquisition by Angostura.

These gentlemen have now been replaced by Conrad George, Richard Downer and Michael Bernard.

A former Lascelles executive speaking under condition of anonymity said: "For some time the Board of Directors of Lascelles deMercado have been aggressively opposing CL Financial raiding its cash reserves and now you hear of this huge dividend payout. The question is did the directors hear about it before the shareholders were informed? "CL Financial has to make good on a debt to bondholders of US$340 million which is due on July 23, 2011. This in effect means it has to raise money to address this situation and time is running out. This debt has been in default for two years now and the bondholders have exercised forbearance repeatedly. Let's not forget here that this debt is secured by Lascelles' shares."

The new Board of Directors had its first meeting last week with Fraser Thornton replacing McConnell as managing director of Lascelles deMercado effective July 1st, 2011. The bondholder debt of US$340 million breaks down as follows: US$102 million is held in Jamaica with NCB and First Global Bank holding the lion share of that portion. Another 80 or 90 Jamaicans hold US$40 million. Trinidadians hold the remaining US$240 million of which the majority of that is held by government entities including one pertaining to national insurance.


Source:
AL EDWARDS
Jamaica Observer
Sunday July 10, 2011

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