The $50 million debt that British Caribbean Bank (formerly Belize Bank) of the Turks and Caicos is claiming from both Belize Telemedia Limited (BTL) and the Government of Belize, had been in the headlines all of last week, and on Friday, Prime Minister and Minister of Finance, Hon. Dean Barrow, penned a new order “for the avoidance of doubt,” which Barrow said would make it clear that his government has stepped in the shoes of a bank owned by the British tycoon and political bankroller, Michael Ashcroft, for the loan, despite a recent lawsuit the BCB filed in the Supreme Court of Belize to recover the funds.
As we had reported on November 26, 2009, BCB is suing BTL for a US$22.5 million loan the company took in 2007 to purchase its own shares from the Royal Bank of Trinidad and Tobago, when American Jeff Prosser defaulted on payments to the bank.
BTL’s government-appointed board last week told the media that it was illegal for the then shareholders to take out the loan—a loan which they say BTL cannot afford to pay, setting up a situation where the company was bound to enter into receivership and lose all its core assets, which were pledged to the bank in a subsequent mortgage debenture.
In August, the Barrow administration nationalized BTL and its subsidiaries, and furthermore, acquired the rights of Ashcroft’s bank in relation to the debt, thereby securing BTL’s assets, Prime Minister Barrow has claimed.
Notwithstanding that claim, BCB continues to contend that BTL should pay the bank. Prime Minister Barrow, in an interview with our newspaper last week, said that the bank cannot get paid twice, pointing to a claim BCB filed with the government a month ago to have government pay BTL’s debt, following the nationalization of the company.
There is a new dimension to the story, however. Government has furthermore clarified that it has also acquired the bank’s rights with respect to Sunshine Holdings Limited, identified as one of several companies through which Ashcroft held a super majority of shares in BTL.
Government had acquired 100% of Sunshine Holdings at nationalization. At the time, Sunshine had 11 million shares in BTL, nearly a fourth of BTL’s shares.
The new order says Government is acquiring the bank’s rights as well as the rights of CAEDMAN Limited under the Syndicated Loan Agreement (a $40 million loan) of September 19, 2005, and the Security Agreement of the same date.
The order also purports to transfer the rights of the bank, as well as the rights of the trustees of the BTL Employees Trust in the facility agreement, dated May 16, 2006.
Back in 2005, Sunshine Holdings, under Ashcroft’s control, obtained a syndicated loan in which BCB (as the Belize Bank) loaned $20 million for the purchase of shares in BTL. Central Government and Social Security loaned $10 million each, for a total of $20 million, on concessionary terms, with no collateral. (Those shares were formerly owned by the government and Social Security.)
Even though SSB and Central Government remained exposed, with no collateral for the $20 million in debt, the batch of Sunshine Holdings shares, purchased with the syndicated loan, was used as collateral for the Belize Bank debt.
The transaction was done under the guise of helping BTL workers to secure a financial interest in BTL, but the union rejected the offer, it said, because Ashcroft was the controlling force behind the arrangement.
The irony in that transaction is that back in 2004, the Musa administration had argued that the basis for selling SSB’s shares in BTL to American Jeff Prosser was that BTL would no longer be a good investment for Social Security, even though BTL had always been and continues to be a cash cow.
Only months after the sale of the SSB shares, SSB turned around and loaned $10 million of workers’ money—interest free for five years and at a concessionary rate of 8.5%—to the Ashcroft-controlled company to purchase more shares in BTL.
A BTL union exec said they were informed earlier this year that Sunshine had earned $11 million in dividends already—dividends from which they have received no benefits, although Sunshine claims to be owned by a trust for BTL’s workers. (There had been talk of having workers come onboard with the trust—especially in light of nationalization rumors—but nothing materialized.)
Back in 2004, the Musa administration temporarily nationalized BTL and sold 89% to Jeff Prosser, but resold those shares to the Ashcroft group, which had separately bought out smaller shareholders.
Five years later, in 2009, the Barrow administration nationalized BTL, acquiring 94% of the company on the claim that it was taking back the company to put an end to litigation, and pledging that his administration would make the shares available to interested Belizean shareholders and possibly for partial sale to a foreign investor if locals are unable to purchase all the shares.
The first nationalization was by concession for a US$5 million premium paid to the Ashcroft group; the second was by sovereign decree.
In the BTL nationalization order, dated August 25, 2009, and signed by Public Utilities Minister Melvin Hulse, and Prime Minister Barrow, the government declared that it was acquiring all proprietary and other interests that Ashcroft’s bank in the Turks and Caicos had in BTL and any of its subsidiaries.
Part I of the order detailed the shares that Government was acquiring, including the 94% of BTL and 100% of five other companies: Sunshine Holdings Limited, Telemedia Investments Limited, Telemedia (Free Zone) Limited, Business Enterprise Systems Limited and BTL Digicell Limited, all of which had the address of 212 North Front Street, Belize City, one of the bases of operation of the Ashcroft Group of companies.
At the time of the nationalization, Sunshine held 11 million shares in BTL, now owned by the Government of Belize, which took control from the trustees of BTL Employees Trust, Keith Arnold and Dean Boyce, who are suing Government in the Supreme Court, claiming that the nationalization was unconstitutional, null and void.
Amandala understands that the bank is maintaining its stance that BTL has to pay the $50 million debt, and also that the $8 million debt from Sunshine Holdings is fully due.
Eamon Courtenay, BCB’s attorney (who is the campaign manager of the Opposition People’s United Party and a former minister under the Musa administration), told their affiliate TV station, Channel 5, on Friday, December 4, that, “If money is owed to you, you can sue for the debt, you can wind up a company, you can sell its assets, you can foreclose on property; all of these things are options.”
As we had reported last week, even though BTL’s board had declared the US$22.5 million illegal, BCB has maintained its stance that it was perfectly legal and therefore, has to be settled—this even though the Ashcroft group of companies ended up with virtually all the shares repurchased with the bank loan.
“The money will be repaid. It should be repaid,” Courtenay insisted. “To take money from a bank and not pay it back is something which is well known to all Belizeans. People lose their property all the time because they don’t pay a debt. It is no different for Telemedia.”
Prime Minister Barrow has gone on record to say that Government fully intends to pay compensation to the Ashcroft banks for the debts; however, the acquisition orders mean that the government has now stepped in the place of the creditor – meaning that BCB should no longer pursue BTL.
At the time of the nationalization, the 2-year grace period for the payment of principal on the BCB loan had just ended. According to BTL’s board, the payments due as of August 2009 amounted to an unbearable $1.8 million; however, the former board recognized that BTL could not afford to pay that bill, because back in July, they had asked the bank, then a sister company of BTL, to postpone principal payments for another year. However, they could find no reply from the bank on record.
Prime Minister Barrow said that the fact that Ashcroft’s bank filed compensations claims with the government a month ago for the same US$22.5 million debt indicates that they realize they no longer have those rights to make claims against BTL.