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Home General Taxpayers in danger of eating $105mn Intelco loans!

Taxpayers in danger of eating $105mn Intelco loans!

A draft memorandum of understanding (MOU) that has been circulating recently outlines the proposed terms of the sale of Intelco?s assets and license to the new owner of the Belize Telecommunications Limited, Jeffrey Prosser. Government, the MOU said, would serve as a ?third party accommodator.?

Fonseca confirmed today that the Government of Belize has been involved in the negotiations, but only to ensure that the public funds Intelco owes will be repaid. However, there is much doubt tonight whether that repayment would actually be realized.

In April, it was widely reported that the Government of Belize had paid $1.5 million to the International Bank of Miami (IBOM) for Intelco, after the company had received its second ?past due? notice from the bank. Government?s explanation was that it was paying Intelco for services and equipment lease.

Then last week, the media reported that the Belize Social Security Board had to meet over $6 million in payments for default on a group of securitized loans which are assigned to Intelco?s principal, Glenn Godfrey. It turns out that the Government had guaranteed millions of dollars in loans for Intelco. However, when we asked the Finance Minister for a figure on Intelco?s debt to the public sector today, he said he could not quote one.

Later today, we received a press release from the Opposition United Democratic Party (UDP), claiming that the Government had in fact secured $105 million in loans for Intelco. Attached to the UDP?s press release was a letter Intelco?s chairman/CEO, Glenn Godfrey, purportedly had written to Ronald Saunders, a director of Prosser?s umbrella company, Innovative Communication Corporation (ICC).

The letter, which the UDP told Amandala it believes is authentic, outlines Intelco?s current indebtedness, including $6 million it owes to the Belize Social Security Board; this is in addition to the debts that government had secured for the company, the letter noted. (See table titled, Intelco Debt for details.)

How Intelco?s public debt to Social Security of at least $6 million will be settled is the key question now, as the MOU we referred to earlier notes that Godfrey may get as little as $1.7 million cash from the sale.

In exchange for Intelco?s assets, the buyer, which will likely be Mr. Prosser, would additionally take on Intelco?s existing foreign debt, including $24.87 million (mn) owed to the Royal Merchant Bank of Trinidad and Tobago (RBTT) and $8.38 million owed to the International Bank of Miami (IBOM).

An interesting part of the purchase proposals is for Godfrey?s bank – Provident Bank, which loaned Intelco $6.84 mn, to get its repayment in shares in the restructured telecommunications company. Why Prosser would agree to give Godfrey?s bank shares in BTL (or its parent company, Belize Telecom Ltd.), when he had previously pledged full control over the telecommunications company, is anybody?s guess.

Even before he closed the deal with Government to purchase majority interest in BTL, Prosser indicated to Amandala that the three licensed competitors?BTL, Intelco, and SpeedNet?could not co-exist.

Asked whether there was room in the local market for BTL, SpeedNet and Intelco, in the current competitive environment, his sharp reply was, ?NO! But that will take care of itself.?

While Government?s stated intention was to promote competition and hence keep down the cost of services to consumers, Government nonetheless closed the deal with Prosser, despite his bold declaration that competition would not last, and furthermore, that while competition may drive down prices in the short term, it would eventually result in higher prices. Shortly after the BTL buy-out, Prosser began negotiations with Glenn Godfrey to buy out his competitor, Intelco.

We understand that Intelco has also been negotiating, to a lesser extent, with DigiCel and AT&T, two international companies.

?It would certainly trouble us as a Government if Intelco were to start to sell off parts [of its asset base] that could endanger any kind of obligations that it has through the securitization process, because it?s a part of the Godfrey group,? Fonseca told us.

He explained that ?During the time of securitization, ?the Godfrey group? put in several of their own mortgages, either through St. James or through Alliance, in the days that we were securitizing mortgages from the Ministry of Housing, the Belize National Building Society, etc.; they put in about four mortgages in this securitization pool [sold to foreign banks.]

?Each of the mortgages had its own assets to back it up,? he said.

It was the money borrowed for Data Pro, Fonseca explained, that was used to develop Intelco, whose headquarters was first established at Data Pro?s EPZ in Ladyville. However, a company executive had previously informed us that the properties that Intelco occupies had actually become Intelco?s.

The question, said Fonseca, is: ?What part of the securities proceeds [borrowed from abroad] were used to put assets into Intelco??

When we asked whether Government?s involvement in the negotiations for Prosser to buy out Intelco conflicted with its promise to bring competition to the market, Fonseca remarked that ?Competition is still our ambition. It?s just that competition is a very large ambition …but it?s a lot more complicated than anybody believed that it would be ??

?We?ve always felt that more than two companies would have been too much competition,? he said, adding that SpeedNet is still in the picture and is in the process of importing $10 million in telecommunications equipment.

While the Prosser-Godfrey negotiations are ongoing, he said, the first commitment is that ??any delinquency of ?the Godfrey group? is repaid as a result of pending transaction.?

What is the Government?s recourse if Godfrey does not repay?

Fonseca replied that, ?If Godfrey can?t pay it, then they?re gonna have to foreclose on their assets and sell their assets.?

Interestingly, Godfrey?s alleged letter to Saunders values Intelco?s assets at just under US$50 million. However, only two months ago, former Intelco CEO, Juan McKenzie, reported, on record, that Intelco?s assets were valued significantly more?at US$63 million.

Fonseca said that Government?s task in the pending sale is ?to ensure that those assets [held as securities against the current securitized loans] would not be transferred to Prosser.?

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