Mar 2007 Financial News

GraceKennedy creates group for financial subsidiaries - BoJ prods NCB to follow suit

Mar 02, 2007

The GraceKennedy group has established a separate holding company for its financial subsidiaries - a response to a directive from the central bank that conglomerates unbundle their banking businesses from other operations.

Don Wehby, the CEO of GK Investments, the unit under which Grace's non-food businesses now fall, yesterday confirmed the restructuring, saying that in time all of the company's financial entities will be transferred to the new GraceKennedy Financial Holdings. This company is 100 per cent owned by GraceKennedy Limited.


Source:
The Jamaica Gleaner
Friday 2nd March, 2007

http://www.jamaica-gleaner.com/gleaner/20070302/business/business1.html
"The Bank of Jamaica has said that we must put all our regulated entities into a holding company, and we have been reorganising," Wehby told the Financial Gleaner. "It is this holding company that we are looking to take public when the market conditions are favourable."

Among the GraceKennedy subsidiaries that will fall under this firm are First Global Holdings, whose assets include First Global Bank and First Global Financial Services, an investment and stockbroking house.

GraceKennedy Financial Holdings also controls Grace-Kennedy's money transfer subsidiaries in Jamaica, Trinidad and Tobago,Guyana, Antigua, St Vincent and Montserrat and will eventually embrace the insurance businesses Jamaica International Investment Company (JIIC) and Allied Insurance Brokers.

Corporate make-over

While GraceKennedy is the first of the major conglomerates so far to have fully responded to the prompting from the Bank of Jamaica (BOJ), it is not the only one the central bank is in talks for such a corporate make-over.

In fact, Finance Minister Dr Omar Davies recently confirmed that talks were on-going with Michael Lee Chin's National Commercial Bank for some restructuring of the organisation, which would likely include bringing NCB's headquarters operations to Kingston.

Lee Chin currently controls his 75 per cent of NCB through a Barbados-based subsidiary of Canadian investment group AIC Limited.

While Davies referred the Financial Gleaner to the central bank for any details on those discussions, yesterday BOJ governor Derick Latibeaudiere declined to speak specifically on the NCB issue or to either confirm or deny that the regulators were in negotiations with the bank.

"I can say that the BOJ has been working with all financial institutions with a view to having a complete and unfettered access to information flows," Latibeaudiere said.

Last week NCB's managing director Patrick Hylton did confirm talks with the central bank about structure, but declined to discuss details in the absence of a specific agreement for fear that it could lead to market speculation.

'This is not an initiative ...'

However, regulatory sources rejected that the demands on NCB were being driven by a wish by the administration to ensure a greater tax take from Lee Chin's company. "This is not an initiative of the Finance Ministry, it is a regulatory action that is generated by the BOJ and the BOJ is operating purely from a technical point of view," one official said.

It is believed that the negotiations about future structure have contributed to the long delay in regulatory approval forNCB's acquisition of Blue Cross of Jamaica from a foundation controlled by Dr. Henry Lowe.

Clearer definition

In the case of GraceKennedy, Wehby suggested the restructuring had allowed for a clearer definition to the organisation. "We are streamlining our businesses," he said.

Prior to the creation of the new holding company GraceKennedy had talked about taking First Global Bank public, but had put those plans on hold for the better part of two years because of the relative weakness of the stock market.

First Global, currently the No. 5 of six commercial banks, and Citibank, which is in position No. 6, are the only two commercial banks not listed on the Jamaica Stock Exchange.