The nationalization of Belize Telemedia Limited (BTL) has turned nasty with a move by the Michael Ashcroft camp to shut down BTL through a procedure set out in the Companies Act that allows for a bank to instigate the winding up of a company unable to pay its debts—a $45 million loan now running a $50 million tab, according to Ashcroft’s British Caribbean Bank (BCB) in the Turks and Caicos, sister company of Belize Bank in Belize.
The Ashcroft group included that loan with its claims for compensation from the Government of Belize, after Government nationalized BTL and acquired Ashcroft’s shares in the company; yet they are threatening to wind up BTL for non-payment for the same loan, Prime Minister Dean Barrow, Minister of Finance, pointed out, in speaking with Amandala this evening.
“I don’t understand what game they are playing,” said Prime Minister Barrow, adding that the Ashcroft group cannot get the money two times. “They are obviously playing a game,” Barrow reiterated.
“If they were so satisfied that rights still exist [with respect to the loan], then why did they file [for compensation] a month ago?” the Prime Minister questioned.
Amandala has learned that the funds for which Ashcroft is suing BTL and the government were used to purchase shares in a transaction back in 2007, in which BTL purchased its own shares formerly held by American Jeff Prosser—shares that were later apportioned to the Ashcroft group of companies through the payment of dividend in specie.
The effect of the move is that, using funds BTL borrowed from his bank, while BTL was under his control, Ashcroft purchased shares that became his in a turnaround time of about a month, July to August 2007.
Meanwhile, BTL and the government are being pressed to settle the debts. One director is of the view that the large shareholders benefited from the loan, but left BTL to pay the bill.
We understand that BCB wrote BTL on Tuesday, November 24, giving them three weeks to pay the debt or face court action for the company to be wound up.
The Ashcroft group made similar moves against Intelco, a company that was founded by former PUP minister Glenn Godfrey, and Belize Telecom, which was owned by American Jeff Prosser, and formed by the Musa and Balderamos law firm to purchase majority shares in BTL back in 2004.
The process is set out in the Companies Act, Chapter 250 in the Laws of Belize, under section 131, Winding-Up by Court: Company when deemed unable to pay its debt.
The law says that, among other things, if “…the company has for three weeks thereafter neglected to pay the sum… [if] it is proved to the satisfaction of the court that the company is unable to pay its debts…” the company can be brought to an end.
If they BTL could not meet the monthly payments of $1.8 million, as directors claimed yesterday, it is logical to assume that it will not be able to pay $50 million in three weeks.
Yesterday, BTL’s government-appointed board of directors went on record to say that the loan was illegal. Their attorney, Lois Young, said that under Belize law, a company cannot get a loan to buy its own shares—a stance that BCB says is wrong.
PM Barrow says that all the lawyers that the government has consulted say that the loan that BCB gave to BTL for the purchase of its own shares back in 2007 was illegal.
“They stand to lose the entire US$22.5 million,” he commented.
As the dispute over the debt sizzles, Prime Minister and Minister of Finance Dean Barrow is readying his pen to pass a new statutory instrument by Friday, which, Barrow said, is “for the avoidance of doubt,” that the government is stepping in the place of BCB as BTL’s creditor.
Even Prime Minister Barrow has acknowledged that Ashcroft’s net worth equals Belize’s GDP, but he told our newspaper today that he “will fight him every step of the way.”
Government issued an order for the BTL takeover via statutory instrument on August 25, 2009, through which Barrow said that Government furthermore acquired the mortgage debenture which placed BTL’s entire holdings, including buildings and towers, up for collateral with Ashcroft’s bank.
Taking over the debenture, Barrow hoped, would secure the company’s core assets.
Still, BCB challenged the government, saying that the bank still holds a loan facility agreement, on which it had initiated suit in the Supreme Court against BTL. Barrow had told the media, in response, that he could issue another order making it abundantly clear that he had acquired that loan facility agreement, as well.
As to why he has delayed in issuing the order, PM Barrow told us that he had been in Trinidad for a Commonwealth summit, and only just returned to the country yesterday; however, he intends to issue the order Friday, “for the avoidance of doubt.”
That would make it clear, Barrow indicated, that when Government acquired BTL’s majority shares and its assets, it also acquired whatever rights BCB had in relation to the US$22.5 million loan, for which BCB now wants to collect $50 million and wind up BTL.
Amandala had a chance to see the details of the loan transaction today, and it shows that while BCB paid out US$22.5 million to BTL, US$21.9 million of that was used to pay the Royal Bank of Trinidad and Tobago for 10 million shares that had been held by American Jeffrey Prosser. RBTT received the funds through an account at the Bank of New York on July 10, 2007. This does not support claims made in BTL’s last financials that a part of the funds was used for “working capital and capital expenditure requirements.”
Expeditiously, Ashcroft’s directors later distributed the bulk of these shares to companies he controls. Yet, his Turks and Caicos bank is suing BTL to collect the same debt and at the same time, is demanding compensation from the government for the same loan transaction.
While BCB’s director, Michael Coye, told Amandala last week that the bank is merely trying to cover all its bases, Prime Minister Barrow takes the position that the Ashcroft group cannot get paid twice.
As we had reported in an article titled “Prosser, PSU and BNTU fight Telemedia and GOB!”, published in September 2007, RBTT sold the Prosser shares to Telemedia Investments Limited. The month after Telemedia Investments Limited acquired the shares from RBTT, they were paid out as dividend in specie to the BTL shareholders, the vast majority (over 90%) being apportioned to the Ashcroft group of companies.
Telemedia Investments Limited, a subsidiary of BTL, had only 500 shares (valued at roughly $3,500) remaining of the 10 million, at the time its last financials were published for March 2008. It is one of several BTL subsidiaries that the government acquired at nationalization – but it remains, in effect, a shell company, having been used merely as vehicle to distribute the Prosser shares to the Ashcroft group.
Prime Minister Barrow calls the confounding situation “layer upon layer of skullduggery.”
As we reported in our mid-week edition, former BTL chairman, Keith Arnold, a Belizean-American resident in Florida and former Belize Central Bank Governor, has already filed suit to ask the court to reverse the nationalization of BTL.
Currently, Ashcroft controls 77% of BTL’s rival, Smart, and so winding up BTL would benefit none other than Smart, which has for the past two weeks been at loggerheads with BTL over the disconnection of international services tied to a string of agreements BTL’s board said were engineered to have BTL subsidize Smart’s operations.
The two phone companies had for the past three months been at odds over a string of concessionary agreements signed back in 2004, and the Public Utilities Commission last week ordered that the companies renegotiate them to reflect the true cost of services. Those negotiations are pending.
As a side note, Barrow also addressed the status of shares held in Sunshine Holdings Limited. This was the vehicle that the Ashcroft group established, on the claim that they would make shares available to BTL workers, while Sunshine’s directors, Ashcroft’s business allies, held on to the shares and earned at least $11 million in dividends. Four years later, BTL’s workers, who had rejected the terms of the offer, had still not gotten those shares, purchased with a concessionary $20 million loan from government using taxpayer dollars and Social Security funds with a 5-year moratorium on repayments.
On August 25, the Barrow administration also acquired Sunshine Holdings in its entirety, but BCB is suing the company for $8 million in outstanding debt Sunshine also acquired to partially fund the purchase of shares.
Government may want to see a real employee’s trust take up those shares, said Barrow, adding that Government wants to see what can be worked out with BTL employees.
On the question of how much money the Ashcroft group of companies will receive from the nationalization of BTL, Prime Minister Barrow told us that Government has set up a committee of local experts to review the compensation claims of the Ashcroft group, and to undertake a thorough valuation of BTL at the time of the nationalization, to determine what compensation is due. However, if the parties can’t agree, the issue goes to court for a final determination.
“Interest does run from the date of nationalization,” said Barrow. However, that does not mean that Government will move hastily to determine compensation. The legislation doesn’t fix the rate of interest.
The debts on BTL’s books for Channel 5/Great Belize Productions – reported by BTL’s board Wednesday at $10 million – will also have to be factored in when compensation payments are considered, he told us.
Barrow also said that with the claim filed by Keith Arnold to reverse the nationalization, the process could drag out longer than the Government is able to control, because it is imperative for the court to decide on the claim that Arnold had filed even before compensation can be settled.
The Ashcroft camp is throwing as much “mud” as it can to thwart the divestment, because investors may be hesitant to buy in if the status of the company is uncertain, Barrow indicated, noting also that no timeline is set for the final divestment of BTL shares, as it will be a while before the challenge filed by Arnold is resolved.