Jun 2012 Financial News

N&M CEO Gervase Warner speak on BS&T delisting, Almond hotels

Jun 07, 2012

Neal and Massy Holdings Ltd’s (N&M) request to have its Barbados Shipping & Trading Company Ltd (BS&T) delisted from the T&T Stock Exchange (TTSE) was made as a result of the T&T-based conglomerate acquiring all 100 per cent of its shares. So said Gervase Warner, chief executive officer, N&M Group. “Last September we made an offer to the BS&T shareholders for the rest of the outstanding shares, and now that BS&T is 100 per cent owned by Neal and Massy, it becomes a subsidiary of Neal and Massy. “Now that we acquired all of the outstanding shares of BS&T...there was no opportunity for anyone to trade shares anymore.” BS&T’s delisting means change, Warner said. “What you can expect is that Neal and Massy would be a little more prominent in Barbados than it has been in the past. We will continue to respect the fact that BS&T has a long history and heritage in Barbados. “It is 100 per cent-owned by Neal and Massy, the parent company, there are no organisational changes above and beyond what we have already done.”

On May 28, the TTSE issued a statement notifying the investing public that: “Pursuant to an Order of the Securities Exchange dated April 27, 2012, made under Section 45 of the Securities Industry Act, 1995, BS&T would be delisted from the stock exchange effective Monday, May 28, 2012.” Five hotels—Almond Resorts Incorporated—were included in the February 2008 acquisition of BS&T, but those properties suffered from the global financial meltdown. And the huge debts were racking up. In N&M’s 2011 annual report, chairman Arthur Lok Jack said: “Given the uncertainty of the world economic environment and the significant investments necessary to upgrade the hotels in Barbados and St Lucia, the Group took the decision to substantially dispose of its investments in Almond Resorts Incorporated and its associated hotels.” The plan to sell-off Almond hotels was in the cards since 2011. In April 2012, Ralph Taylor, chief executive officer of Almond Resorts, said Almond Beach Village (Barbados) will close April 30 amidst “the deteriorating quality of the product.”

“The relevant impairment charges which arose from this decision, together with the losses for the year from the Almond companies, have been taken through the discontinued operations line in the group’s consolidated income statement.
“The divestment transactions are expected to be completed in the 2012 financial year and would likely result in the Group remaining with an available for-sale investment in Almond Resorts Inc, and with a secured loan to that entity,” read the chairman’s official statement. In April, Warner had told the regional media that Almond was buckling under more than US$51 million in accumulated debt.

Almond Resorts in Barbados comprise:
• Almond Beach Village Hotel, St Peter, which was ranked by prestigious Child Magazine as a Top Ten Caribbean resort for families
• Almond Casuarina Beach set on ten acres that border the white sand Dover Beach, close to St Lawrence Gap
• Almond Beach Club and Spa, St James, is an adults-only all-inclusive retreat

On Monday, Warner gave an update of plans to shed the Almond hotel chain. “We have discontinued the management contract for one of them in St Lucia, we sold the other (in St Lucia),” Warner said. “Two hotels is something that we are in the process of working with shareholders and the government to see what we can do with those two properties in Barbados—the likely outcome is that they will be sold. “The challenge we had after the financial crisis is (that) it started to lose a lot of money, precious little capital or cash was left for upgrading properties, and that lead to more significant cash flow losses from those hotels.” Warner explained the situation got so chronic, the parent company needed to inject capital into the business. “We’ve had to support them with cash injections from N&M. We’ve got to a point where we feel we need to pass them into ownership hands, where people would be able to put the kind of capital into it, to have the performance of these properties turned around,” he said. Warner said the Barbadian economy is contracting and has faced such challenges as downgrading of the economy. Last month, the United States-based rating agency, Moody’s Investors Service downgraded the credit rating of the Barbados-based Caribbean Development Bank (CDB) by one notch from Aaa to Aa1.
In June 2011, Moody’s downgraded the government of Barbados’ rating on its domestic debt to Baa3 from Baa2. Regarding the 2011 downgrading, Moody’s stated: “The outlook on both ratings has been revised to negative, indicating that these ratings could be lowered in the next 12 to 18 months.”

Moody’s cited its increasing concern about the capacity of the Barbados domestic market to continue to absorb the elevated issuance of government debt, while at the same time the country’s already large current account deficit is expected to increase further due to the recent rise in oil prices. In addition, the rating agency’s view is based on the likelihood of a further deterioration in the government’s debt ratios over the next 18 months. A year later, Warner expressed optimism in Barbados’ economic turnaround. “Barbados has a very long, well-established history in traditionally being a resilient island. They’ve got the best resources when it comes to tourism,” he said. “We are seeing some of the foreign investment coming back in. In terms of property share, we think there are some projects that the Barbados authorities can encourage private sector involvement in. “When that comes to pass, we think that it will find its way out. There is no doubt there are challenging times in the Barbados economy. It’s an island where people are very disciplined and they have come through these types of challenges very well in the past. We expect them to do so this time again. “We think there would be growth opportunities in the future and we are well positioned to capture them when they show up.”

Sell off hotels, buy into spirits. In January, Warner told the Jamaica Gleaner that N&M would be interested in acquiring some of the business of Lascelles DeMercado, the Jamaican spirits company that’s a subsidiary of the CL Financial Group, which is now in the control of the Government as part of the CL Financial bailout, if it is broken up and sold off in bits. Lascelles had denied a break-up plan was under consideration, talk of which has been underpinned by the company having fallen into arrears on the servicing of its bonds last year. Warner this week acknowledged N&M had an interest in the Jamaica-based Lascelles DeMercado. “That is a property that has been bid for by CL Financial. Yes, we have an interest in it. I suspect quite a few other people have an interest in it, too.”

About Lascelles DeMercado and Company Ltd

Lascelles DeMercado sells and services motor vehicles and parts. The company manufactures and distributes agricultural chemicals and pharmaceutical toiletries.
Lascelles also underwrites general insurance, providing sales agents for international airlines and tours in the hospitality industry, and distils, blends and bottles liquor-based products.


Source:
Nadaleen Singh
Trinidad Guardian
Thursday June 7, 2012

http://www.guardian.co.tt/business-guardian/2012-06-06/nm-ceo-gervase-warner-speak-bst-delisting-almond-hotels