The pursuit of the Jamaican conglomerate Lascelles de Mercado (LdM) by collapsed conglomerate CL Financial (CLF) has been described as the "one that broke the camel's back".
It cost CL Financial under the chairmanship of Lawrence Duprey, about US$700 million.
After a bond was issued and several loans as well as inter-company loans were sought, the sale was eventually concluded in June 2008.
But CL never recovered from the massive investment.
Seven months later, Duprey was cap-in-hand to the then PNM government for a bailout of his illiquid insurance company, CLICO using CLF's assets as collateral.
As the current Government seeks to recover approximately $17 billion which it has expended into Duprey's cash-strapped empire, CLF has sought to dispose of certain assets.
Last week, foreign company Campari announced that it would acquire CLF's 81.4 per cent stake of LdM for $415 million.
CLF chairman Gerald Yetming told the Sunday Express that the sale, which was first reported in the international media, was the best opportunity to pay back the noteholders. Creditors in T&T and Jamaica are owed US$342 million.
But CLF, he said, expects to net $546 million for the sale.
Yetming said the multi-million dollar transaction was broken into two parts—Campari would acquire the spirits part of the business for US$415 million at US$4.32 per share for the ordinary units and US$0.57 for the preference shares while all other LdM interests would be divested for about US$80 million.
Yetming pointed out that since the bond was issued, CLF has had problems paying interest on the notes. The bond was issued in 2008 as part of Duprey's vision to expand the rum aspect of his business—CL Spirits. It was restructured in 2011 but the company struggled to meet it interest payments.
Yetming, who is also the chairman of CLICO and Angostura, explained that CLF had been in repeated default to its noteholders with the last extension granted for December 2012.
In a press statement following Campari's announcement of the acquisition last week CLF stated:"The 2008 secured debt has repeatedly gone into default and forbearance and now has a final maturity date of December 31."
"If we were unable to raise the money by December 2012, the noteholders could have moved to sell their notes," he said.
He observed that the company blocked a hostile takeover from its former managing director William McConnell who sought to acquire the notes for $342 million.
The statement observed that the CLF board, having evaluated a board range of strategic and financial alternatives reached an agreement with Campari "at an attractive price that returns significant value to all LdM shareholders. The agreement also provides CLF with substantial proceeds that will be used to fully repay all remaining 2008 Secured Debt related to the original acquisition of LdM".
Three state entities—the Unit Trust Corporation (UTC), the National Insurance Board (NIB) and banking group First Citizens—will be recipients of multi-million dollar sale as they are all noteholders.
The Sunday Express understands that the UTC and the NIB are expected to receive approximately US$100 million while First Citizens is among a number of local financial institutions which are owed some $40 million.
About $102 million is owed to Jamaican noteholders.
"The noteholders will be re-paid. They've lent money and repeatedly could not get paid. The consequences of not paying them back meant CLF could have lost the company for US$342 million," said Yetming.
Yetming explained that CLF began looking for a buyer in March 2012 and enlisted UBS Investment Bank as CLF's exclusive financial adviser. UBS, he explained, invited 20 international companies for bids. Those companies were- Ansa McAl, Barcadi, Bourse Securities, Beam Inc., Brown-Forman, Campari, Cuervo, Diageo, Pernod Ricard, Distell, the Edrington Group, Flor de Cana, Heaven Hill Distilleries, Jagermeister, Navigation Partners, Neal and Massy, SPI Group, Sazerac, William Grant and Sons and Suntory.
Of those 20 companies, 12 signed confidentiality agreements to indicate their interest but only six submitted bids. Those who submitted bids were Ansa McAl, Campari, Distell, Navigation Partners, SPI Group and Williams Grant and Sons. Of those six, two bids were rejected. After presentations in Jamaica, only two companies submitted final bids—Campari and Distell. Yetming said Campari emerged as the preferred bidder.
The CLF release explained: "Prior to the closing of the transaction, LdM will complete the process of divesting all of its non-core assets (principally, LdM's insurance business, its transportation assets and certain marketable securities in other companies), a process that the LdM Board independently began earlier this year, as it concentrated on maximising shareholder value by focusing on the core rum business of LdM.
The company is expected to realise aggregate net proceeds from the liquidation of such non-core assets, including the sale of Globe Holdings Limited, Ajas Limited and Transportation Agencies Limited, and the liquidation of certain marketable securities (including the Carreras shares), of at least US$80 million."
"The total cash proceeds per ordinary share for 100 per cent of LdM, including all estimated pre-closing extraordinary dividend noted above, is expected to be approximately US$546 million or US$5.69 per ordinary share, subject to various closing adjustments in the agreement and actual proceeds of non-core assets (net of taxes and certain expenses," the CLF statement said.
The sale is will be concluded in the fourth quarter of 2012.
But the CLICO Policyholders Group is unsatisfied with the state of affairs.
Chairman of the CPG, Peter Permell is calling on Finance Minister Larry Howai to give full disclosure on the sale.
"We are concerned that billions of dollars worth of assets are being sold pursuant to the MOU and shareholders agreement signed between CLF and the Government in 2009, however, neither policyholders nor taxpayers are being kept informed in a sufficiently transparent manner as to the tendering process (if any) or how the proceeds from the sale are to be utilised. This is not the first time that this has occurred as many citizens would recall the previous sale of 100 per cent of the shares of another CLF's subsidiary, the Primera group, to Canadian oil company, Touchstone Exploration Inc last year for US$50.7 million. The country only found out via the foreign media and policyholders did not benefit from the transaction," said Permell in a release yesterday.
Permell said he was concerned that the policyholders would not benefit from the Lascelles sale.
But Yetming pointed out that Lascelles being a CLF asset, his obligation was to the shareholders and not to the policyholders. He pointed out that the shareholders of CLF agreed to the transaction.
But Permell noted that the sale was troubling, "because it is happening at a time when another budget is rapidly approaching and there is a deafening silence coming from Minister Howai as to when policyholders are going to be paid the CLICO trust fund or NEL2 shares that we were promised by this PP Government since last year. Surely, Minister Howai must be aware that it is this promise of NEL2 shares and this promise alone upon which policyholders relied to accept Government's revised offer".
The Sunday Express was reliably informed that NEL2, now known as the CLICO Investment Trust, will come into being in October.
"The process is proceeding. The Minister of Finance is expected to address it in his budget at the end of September," an informed source confirmed to the Sunday Express yesterday.