The letter suggests to the SSB that it could purchase half of the $22 million debt that the Belize Water Services Limited (BWS) contracted with the Alliance Bank. It was only after privatization in 2001 that the BWS took on the debt.

Mr. Espejo, former chairman of the Development Finance Corporation until earlier this year, proposes that the Alliance Bank could repurchase the $11 million debt that SSB would take for BWS in about three years. Of course, the buy-back is conditional on a set of factors, one of them being that BWS does not breach its loan agreement with Alliance.

SSB deposits in the Alliance Bank earn 8.5% interest, while Alliance earns 12% on the BWS loan, which means that the bank earns a net profit on the SSB?s deposits. Call it the SSB cookie jar.

What is also noteworthy is that under the terms of the BWS?s current loan with the Alliance Bank, only interest is paid until October 2009. Quarterly payments of principal and interest totaling $1.7 million aren?t payable until January 2010. The loan fully matures in October 2013.

It is not certain what the structure of the $22 million loan would be if the SSB becomes the new lender. What is certain is that the mechanics of the proposed transaction are far too complicated to convince SSB?s board of directors, who met in a regular session today, to buy into it.

Instead, the SSB has decided to make a counterproposal?that they want to take on the whole $22 million BWS loan from Alliance. One argument is that this is the only way SSB could ensure that it would get its money from the Alliance Bank.

Amandala sources say that on November 25, 2005, a $5.4 million term deposit, which the Alliance Bank has been holding for the SSB, matured. That deposit was rolled over to January, when the Alliance Bank would be expected to pay SSB its cash. The SSB, we understand, is concerned that there may be a risk that the Alliance Bank may not be able to pay them the full $5.4 million then.

The SSB today decided that the only way it would buy into the BWS debt is if it gets the whole $22 million, which would give the SSB rights to the security?all of BWS?s operating assets. We don?t know what valuation has been placed on the assets, if any.

The approval of the new transaction, which is, in effect, a new SSB loan to the BWS, is contrary to a decision to halt SSB lending to the private sector while the investigations into the SSB?s investment and loans are ongoing, and while a new investment policy is being developed.

The justification for that is that BWS is now ?a Government entity,? since Government now owns 82.68% of BWS; SSB owns another 10%.

It is a big gamble?a $22 million gamble?since there is no telling who will end up controlling BWS. That question won?t be answered until after the Government completes the share offering in the company on January 31, 2006.

Our sources say that the SSB has committed to a new policy whereby it would ensure that its deposits are spread more evenly over the various banks. However, swapping the BWS debt would mean that millions that could be supplied to other banks, remain tied up until the BWS loan is paid off.

Alliance Bank is being run by Jorge Omar Espejo, who succeeded Glenn Godfrey as the chairman of the now insolvent DFC.

As the chairman of the DFC, Godfrey used the SSB to get more than $40 million for his group of companies, including the defunct Intelco. SSB ended up meeting $7.8 million in defaults for the Godfrey companies. It was repaid $6 million with an Alliance Bank cheque, which was re-deposited in the Alliance Bank. $1.8 million remained outstanding and some SSB directors insisted on having its money back.

While both the SSB and the Government of Belize gave guarantees for the loans, taken under the securitization program, there is the question of whether the SSB guarantees for the Godfrey loans are legal.

We are informed that recently the Government of Belize transferred to SSB the parcel of land where the administration building sits in Corozal, to cover Godfrey?s $1.8 million.

After the Senate Special Select Committee began investigating the SSB, SSB stopped meeting the Godfrey defaults. Instead, the Ministry of Finance has been meeting the payments.