May 2004 Financial News

AIC debt sold to DB&G

May 04, 2004

Source: Jamaica Gleaner
published: Friday | April 30, 2004

By Andrew Green and Al Edwards, Staff Reporter and Financial Editor

THE government has sold the $2.54 billion debt owed by AIC (Barbados) Limited at the close of the last financial year in March to local finance house Dehring Bunting & Golding (DB&G).

The Michael Lee-Chin controlled AIC acquired three-quarters of the Government-owned shares of National Commercial Bank in March of 2002. That deal involved the payment of $2.65 billion in cash and $3.38 billion in eight annual instalments by AIC.

"During the last fiscal year, the Government divested various assets to the tune of $6.9 billion," Minister of Finance & Planning, Dr. Omar Davies, said during his closing Budget presentation in Parliament on Wednesday. The divested assets included the "sale of receivables from AIC," he said.

Excluding the $423 million 2003 payment as well as the 2004 payment due in March, the amount involved would have been $2.54 billion. Analysts told the Financial Gleaner that the Finance Ministry should have received about 50 cents for every dollar of debt as the present value of the sum due in over the next six years. Based on this estimate, the Government should have got a cheque from about $1.27 billion from the sale. Investment bankers Dehring Bunting & Golding (DB&G) executed the deal on behalf of the Government.

PROPOSAL

"The Government of Jamaica (GoJ) has favourably considered a proposal that we put to them for the securitisation and ultimate sale of a large block of their marketable receivables," a DB&G spokesman told the Financial Gleaner in a March interview. "If this sale is successfully concluded," the DB&G spokesman said, "it would greatly assist the Government of Jamaica in its attempt to contain the fiscal deficit within the most recently targeted levels... and yes, earn us a little something as well."

Speaking with the Financial Gleaner yesterday, the chairman of DB&G, Peter Bunting said: "Late last year when the Partnership for Progress was examining ways of reducing the country's level of debt, Colin Steele suggested that the Government divest itself of a number of assets. Included among the assets was the AIC debt which represented a half a percentage of GDP. I thought it would be a good deal for us so we moved to buy the receivable, securitise it and then sell it to the public.

INSTITUTIONAL INVESTORS

"I must say that mainly institutional investors have taken an interest, namely pension funds and unit trusts. There has been a large demand for this debt and if I had twice this sum I could still sell it. The beauty of this deal is that it counts as a revenue transaction."

DB&G applied a propriety solution for this deal and apportioned this debt into large blocks, keeping a portion for its clients. It is important to note that at this point in time the Government's capital revenue has over-performed just when it is focused upon reducing the fiscal deficit.

DB&G has managed to land some very impressive deals over the course of this year. It had already handled the funding for the country's largest road project , via the Highway 2000 bond. Through a competitive auction DB&G won the right to handled the sale of 79.5 million LoJ shares followed by the tdeal that saw the divestment of 28.5 million Government's shares in RJR. This latest coup augurs well for the investment bank that began some ten years ago. "Recently I felt very complimented when many people were asking, 'how does DB&G manage to land all these Government deals?' And Chris Berry of Mayberry Investments said: 'Simple. They are the best investment bank in Jamaica'."