This week, THE NEW TODAY reproduces the third and final part of a report that was done by a group of financial experts and presented to the Tillman Thomas-led National Democratic Congress (NDC) government on a controversial multi-million dollar guarantee that given by the former administration to facilitate a project involving the state-run Marketing & National Importing Board (MNIB).
This loan guarantee was identified by the financial experts as one of three bad deals done by the Keith Mitchell-led New National Party (NNP) government that helped to increase the national debt by EC$58.4 million by the end of 2006.
January 26 Chip Gomes of ANSA writes to James at MNIB, further to our conversation on January 24, 2005, ANSA as Trustee for the US$4M bonds issued by MNIB, write to confirm it understand of the actions you undertook to carry out:
You would have met with the Minister of Finance and obtained instructions on the project as directed by Cabinet and this would be communicated to the Trustee without delay
Prompt steps will be taken to establish a debt service account with the Trustee for the next required payment of principal and interest to the bondholders.
MNIB will submit a plan covering the strategy to complete the project, the anticipated cost and if monetary shortfalls are expected how they will be funded.
Although we have not had a clear response to our letter of January 3, 2005 we wish to make it abundantly clear that the Trustee expects no payment will be made from the SG Principal Protected Note of US$2.9M with the Trustee’s written approval.
Fitzroy James, General Manager issues a memo to the Board of Directors to provide an update on the status of the financial arrangements and to decide on approach to addressing the current situation.
Under current situation he states:
The structured financing arrangement proposed by NPL/Target has failed and has in fact become a liability on our original project funds
The bond value is now US$2,566,250 or a loss of US$340,750
The Target US$1.6M 30% guaranteed minimum annual yield was never issued
Alternative investment products suggested by Target to meet project short fall are not recommended for consideration
Minister of Finance has advised that Target is again under investigation for investment fraud
ANSA has turned down a request for additional funding
ANSA loan of US$4M starts April 25, 2005 with first payment due July 25, 2005
ANSA wants a proposal by January 28, 2005 on arrangements to move forward with the project and to meet debt service
Awaiting proposal from NPL on moving forward with project
Under Implications he states:
No liquid funds available for implementing the project
MNIB has no income stream to meet debt service
GOG guarantee may be invoked in the vent of MNIB default
Under Proposals for Consideration he states:
Terminate relationship with Target
SG bond be offered as security for a line of credit to start the project
The proceeds applied for construction of first two floors and for current debt repayment
Transfer US$50,000 from CMMB to ANSA for debt servicing
Meet with ANSA/RBTT to discuss options proposed
MOU among Republic Bank, RBTT, UTC, CMMB, the creditor’s committee re the proposed re-structuring of the debt owed by the GOG following the devastation caused by Hurricane Ivan is signed by all parties.
MNIB/ANSA meeting at Crown Plaza Hotel
Chip Gomes of ANSA writes to James at MNIB in relation to their meeting on April 13 to provide an updated on MNIB and the construction of Valu Center Supermarket. It would appear that at present there is no specific comprehensive plan to make the project feasible. MNIB must cause the US$2.9M in the Societe Generale instrument to be assigned to the Trustee without delay and MNIB must allocate the first debt service payment of US$218,381 to a reserve account for the Trustee bondholders. We require your immediate compliance with the above requests.
James writes a letter to Hon Gregory Bowen, Minister of Agriculture & MNIB with copy to Curlan Gilchrist, acting Chairman MNIB, to advise on an earlier meeting with Chip Gomes, Nigel Edwards and Kathleen Nee Sabga from ANSA. MNIB was represented by Patrick Antoine, Strategic Advisor to GOG and Glen Harris, Managing Director of Dominion Capital, Trinidad. To go forward:
* General agreement to reduce scope to original two floors
* Liquidate the SG Bond use funds for project
* MNIB needs to raise US$2.14M to implement the project
He states that Chip Gomes of ANSA placed on record the Bank’s disappointment about the use of the funds provided for purposes outside the original scope of the project without the Bank’s consent and expressed deep concern about the MNIB’s ability to meet the bond repayment obligation to bond holders as they become due.
ANSA wanted immediate assignment of MNIB US$2.9 SG Bond and deposit of first installment on debt service of US$218,381.43 due October 2005.
For consideration and direction:
Raising new financing (US$6,822,845) to settle the ANSA loan in full and reduce the scale of the project.
Yesterday it came to our attention that the Executive Committee of ANSA and the ANSA Board took a decision to seek direct audience with yourself and the Most Honorable Prime Minister on this matter. We once again record our deeper regret about the difficulties caused.
April 26 James reported to the MNIB Board on May 24, 2005 on the details of a meeting held on April 26. The persons at the meeting were Bowen, James and Pat Antoine. The Minister concluded that the ANSA loan should be repaid and option should be identified to ensure the project can pay for itself.
There cannot be any default with ANSA, the Board will engage Dominion Capital to secure the financing, the SG Bond is to be liquidated and proceeds applied accordingly. Dominion is to report back in 30 days on the most feasible options.
May 24 Nigel Thomas of NPL wrote to Sendjer Shefker, Director of Target international Funds ltd, in London re GGH and MNIB. He set out a list of requests for various financial information including names of investment houses, etc in relation to the projects and Neil Seepersad.
July 27 Minister responsible for MNIB authorized the MNIB to redeem the SG bonds based on its poor performance and to place the proceeds in an interest bearing account. MNIB was to seek alternative sources of financing. The bonds were redeemed at US$2.33 million and placed in an account at ANSA. Dominion Capital of Trinidad was contracted by MNIB to raise funds but so far have been unsuccessful. (See July 13, 2006)
August 4 Curlan Gilchrist, acting Chairman of MNIB writes to Gomes at ANSA to advise the Board is to move to redeem the US$2.9M and to place the funds into an account that will give maximum returns and over which it has control. The funds are to be applied to the Board’s lagoon Road Business complex Project. We are preparing a proposal to make this project feasible for your attention within the next few weeks.
October 25 First interest payment is made from proceeds of the bond at ANSA.
April 25 Second interest payment is made from proceeds of the bond at ANSA leaving a balance of US$1.8 million.
May 3 Gomes at ANSA writes to James at MNIB with an accounting to report the balance of funds on hand is now US$1,938,880.51 that is invested at 5.29%. As discussed the payment of interest out of the funds held with ANSA can only be seen as a very short term solution so we eagerly await your proposals for a permanent solution.
July 13 “Cabinet Submission” from Bowen on ANSA/MNIB Lagoon project where the key issue is whether GOG will take over the liability for the repayment of the ANSA loan and authorize MNIB to proceed with seeking new financing for the Lagoon Project.
ANSA are eagerly awaiting a proposal for a permanent solution to the matter. MNIB believes it could secure financing using the property as collateral but this could only be accomplished without the ANSA liability.
The balance of the funds held at ANSA should be immediately applied towards the reduction in the loan with the repayment terms re-negotiated. Under ‘related concerns’, public and political concerns have been expressed about the failure of the project. In the absence of this investment, MNIB will be unable to meet the repayment requirements on the loan and GOG will become liable for the repayment of the loan for US$4,597,503.69. Under ‘consultation period’ the consensus of opinion was that the project was a viable investment however, ANSA debt must be treated separately to attract potential financiers.
Under ‘Conclusion and Recommendation’ the Minister of Finance recommends:
Agree to take over the MNIB US$4M loan with ANSA
Agree to negotiate with ANSA to apply the funds on hand of US$1.9M to reduce the US$4M loan and to reschedule the loan repayments before October 25, 2006, the next interest due date.
Authorize MNIB to secure new financing (US$6.9m) in its subsidiary, Val-U Garden Grenada ltd using the Lagoon property as collateral.
Agree upon completion of the project to consider selling some shares to raise the amount required to settle the ANSA loan.
Signed by Bowen and PS on July 13, 2006
July 17 “Cabinet Conclusion” approved the above “Cabinet Submission”
July 31 PS of Ministry of Agriculture writes to James at MNIB to advise of Cabinet decisions.
February 23 Ministry of Agriculture meeting and present is PS, Ministry of Agriculture and Finance, a person from Finance and James and the ANSA loan was the first agenda item.
PS Finance placed on record his disagreement with the Cabinet decision and stated that GOG was not in a position to take over this debt which will increase its overall debt stock and place further strain on its total debt service obligations. His recommendation to Cabinet would be:
MNIB should renegotiate the loan and seek legal advice on the intended approach and the Ministry of Finance is prepared to assist.
James advised MNIB was not in a position to service the debt.