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P.M. to Ashcroft: Prove the charity!

GeneralP.M. to Ashcroft: Prove the charity!
Last week Thursday the House of Representatives passed a controversial bill to increase the rate of business tax paid by the Ashcroft-controlled Belize Telemedia Limited, and similar telecommuncations providers, from 19% to 24.5%. By Friday, BTL responded with an extraordinary press release, closing on the note that the company’s majority shareholder intends to sell to an international operator.
 
That, in itself, was not news, since there have been numerous reports in the local press that the current majority shareholder of BTL intends to sell – and that the real Digicel (Caribbean) had been looking into a possible deal.
 
But what was noteworthy about Friday’s release were claims that Hayward Charitable Trust, listed by BTL as the company holding in excess of 70% of its shares, had just scooped up US$5 million worth of Government of Belize Super Bonds, for 37.4 cents on the dollar, and that it would use the proceeds of the sale of BTL to buy even more of those bonds “for the benefit of all Belizeans.”
 
Prime Minister Dean Barrow, Minister of Finance, told us today that he does not know quite what to make of the BTL release, except to say that it was up to no good. He challenges BTL’s trust companies to prove that they are the kind of philanthropic agencies they claim to be.
 
Telecommunications has proven to be one of the most profitable enterprises in the country, with the country’s premier telecommunications provider, BTL, raking in record profits for its last financial year, so why would anyone want to sell?
 
Some of our readers will recall that we have been down this road with the old BTL (Belize Telecommunications Limited) some years ago: in the midst of a dispute with BTL over phone rates, the Musa administration brokered a deal with Jeff Prosser’s Innovative Communications Corporation back in 2003/2004 for the purchase of almost 84% of BTL, using promissory notes – an arrangement that eventually fell through and that left Belizean taxpayers “holding the bag,” so to speak, for millions in compensation to Ashcroft companies for repurchasing BTL, and having to face litigation in US courts for breaches of contract with ICC.
 
The new talks for the sale of BTL come under a re-packaged and re-branded BTL, following the 2007 Vesting Bill, and the subsequent purchase of Channel 5 as one of BTL’s subsidiaries.
 
Prime Minister Barrow indicated that what Ashcroft seems to want, is to sell off BTL for a new premium, along with a deal from the Government – either in the form of the current accommodation agreement, or in the form of a commitment from the Government that if the company does not make a 15% rate of return – one of the sticking points of the disputed accommodation agreement given to BTL by the Musa administration – it would get the equivalent in compensation from the public purse by simply taking a holiday from paying taxes.
 
Barrow maintained to us that there is no chance that BTL could get him to accept that accommodation agreement, or agree to any such deal to sweeten the sale of BTL.
 
As to Hayward’s purchase of the GOB Super Bonds at a discounted rate – and its assertions that the low trading price is an indication of “lack of confidence in the Belizean economy,” the Prime Minister challenges that statement, saying that because of the global financial situation there are many investors who prefer to cash in on their investments now to improve their liquidity – and that it has nothing to do with Belize’s economy.
 
Barrow said that his suspicion is that the Ashcroft-controlled trust bought off the bonds from other companies he controls, “to make some kind of point.”
 
BTL’s release says that the huge discount on the bonds purchased by Hayward, “clearly demonstrates the international financial community’s lack of confidence in the Belizean economy,” but that either this or the next administration “will be able to bring the nation together so that the Government does not have to once again default on its international obligations.”
 
Barrow said that it is much too early for such speculation to be made by BTL/Hayward about a sovereign default, as there is no indication that the Government cannot proceed with the bond commitments as arranged.
 
He also informed us that one set of brokers – OppenheimerFunds – have offered to sell the Social Security Board 10 million dollars worth of Government of Belize bonds for 50 cents on the dollar. Amandala is informed by SSB’s chairman, Lois Young, that the SSB’s investment committee turned down the OppenheimerFunds offer, but would consider buying for a 60% discount. (We note that this is closer to the range of that Hayward reports it had bought for.)
 
The Prime Minister says that the owners of BTL have been trying to convince his Government that the vast majority of BTL’s shares are owned by trusts, one registered in the name of BTL workers, and the other – Hayward – purportedly a charitable trust for the benefit of “Belizeans.”
 
But Barrow challenges the owners of BTL to show the documentary evidence of that, and to “make the word flesh” by giving BTL workers and other Belizeans seats on the board, and allow them to have a say in how the company’s millions in dividends are shared.
 
Absent that, said Barrow, he cannot believe the assertions made by Telemedia that the company’s profits are going to be endowed to the Belizean community.
 
The Government of Belize Super Bond was issued in February, 2007, for US$546.8 million, and the bonds mature in 2029. Interest payments are now due at a rate of 4.25% – a total of $48 million earmarked in this year’s budget to pay interest on the bonds. Interest rates increase in 2010 and 2012 to 6% and 8.5%, respectively, indicating that the payments for bondholders would increase substantially before the redemption date, roughly two decades from now.
 
The Musa administration issued the new bonds after defaulting on its prior commercial credit commitments, forcing hesitant creditors to buy into the new package.
 
Payment on the bonds is the largest single external obligation of the Government, and the debt accounts for 98% of the Government’s commercial debt, according to Government information.
 
“There is no issue whatsoever,” said P.M. Barrow, responding to Telemedia’s suggestion that the Government runs the risk of defaulting on those debt obligations.

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