Even as he seeks to fix the problems in Trinidad and put in a full-time chief executive officer on the ground, AIC billionaire-owner Michael Lee-Chin is under increasing pressure in Jamaica to take some of the debt weight off his 70 per cent owned National Commercial Bank stock.
Part III of a Special Investigation Camini MarajhSources in Jamaica, speaking on condition of strict anonymity, told the Sunday Express that the Central Bank of Jamaica has asked NCB's majority-owned shareholder to clean up his balance sheet and keep crossover debt tied to his ownership interests in the non-financial sector-in a separate holding company.
The Bank of Jamaica is reported to be unhappy with the amount of NCB shares used to fund Lee-Chin's growing list of acquisitions in the island.
At the close of the September 2005 financial year, AIC Barbados Ltd, the wholly-owned parent of AIC FG (Trinidad) and Lee-Chin's 70 per cent NCB Jamaica interest, listed a portfolio of long term debt for Lee-Chin of over Can$77 million.
The debt is secured by 426,316,075 NCB Jamaica shares, about 25 per cent of Lee-Chin's NCB-held interest. The Government of Jamaica holds a further 30 per cent or 529,106,198 NCB shares as continuing security for the debt obligation of AIC Barbados following the billionaire's 2002 buy-out of the bank's majority interest.
Lee-Chin boasted on the weekend in paid ads published in the Jamaica press that his AIC group has "committed over J$12 billion", J$8 billion more than the J$4 billion he earned in NCB dividends, to investments in Jamaica, namely media and telecommunications, shipping, healthcare, tourism and education.
The ad was a damage containment effort aimed at dampening concerns raised in Part I of this special report that he had funnelled some Can$17.2 million worth of NCB dividends up the chain to AIC Ltd, Canada. On Tuesday, the mutual fund tycoon, who has his own private jet, told TV6 Morning Edition, that the Sunday Express report was "a lie". Pressed by Morgan Job whether he was denying reports that he had repatriated his dividend earnings up to Canada, he countered: "Not everything you read is correct."
It was Lee Chin's second appearance in Port of Spain in the space of four weeks and he was on the offensive, knocking the Sunday Express reports as a "hack job", and putting his own spin on the major stumbles and regulatory breaches detailed in the series of reports.
He took pointed aim at his former number two, Kris Astaphan, suggesting that Astaphan has allied himself with his (Lee-Chin's) business foes. He implied that disgruntled former executives were behind the media leaks of sensitive company information but refused to call names.
Lee Chin declined to be interviewed by this reporter. His main man of business and current CEO of AIC Trinidad, Robert Almeida, in an initial interview with this reporter and in subsequent interviews with other media, kept the Lee-Chin message clear-the Sunday Express had got it wrong.
Audited financial accounts, correspondence from regulators and information culled from more than a dozen sources, however, suggest the opposite. The PriceWaterhouseCoopers audited accounts for 2005 for the offshore holding company in Barbados show that contrary to Lee-Chin's claims, AIC Barbados made a Can$17.2 payout of dividend earnings to its parent company in Canada, AIC Ltd. Lee-Chin's private offshore company upstreamed Can$11.2 million to Canada the previous year.
According to the audited financial statements, the difference between the Can$16.4 million received from NCB Jamaica and the Can$17.2 million funnelled up the line came from retained earnings brought forward from 2004. The accounts details the pass through of dividend earnings from NCB Jamaica to the offshore holding company in Barbados and then up to Canada.
The audited accounts also noted a Can$10.2 million loan paid out to "parent company's shareholder family." The multinational financial services group is almost completely owned by Lee-Chin and his family. Note 3 of the audited statements described the Can$10.2 million advance this way: "Except for the receivable from AIC FG, long-term receivables from related parties are unsecured and non-interest bearing. The amount due to the parent company is non-interest bearing, unsecured and has no fixed repayment date."
The report noted that a substantial part (55 per cent) of the shareholding that AIC Barbados has in the Jamaican national bank has been collateralised to the Government of Jamaica (to whom monies are still owed on the shares transferred to AIC Barbados) and to third party lenders.
And as reported in this series, the heavy leverage of NCB-held shares is causing the Bank of Jamaica plenty of grief. The Bank has sent a clear message to Lee-Chin and his AIC group to get rid of a substantial part of the Can$77 million in borrowings backed by NCB shares, sources in Jamaica have disclosed.
The Bank has told AIC that it needed to separate its non-financial investments from its core financial services and further, that its non-financial investments in cable, hotels and hospitals, among other things, should pay their own debt.
On discussions of AIC setting up a holding company in Jamaica, the Bank, in correspondence seen by this reporter, cited repeated concerns about "how the AICB debts would be treated in the restructuring exercise so as to allow for the transfer of unencumbered shares in NCB to the new holding company."
The Sunday Express understands that a central issue to the entire restructuring of the AIC Barbados group of companies relate to AICB's substantial debt issue. In correspondence to NCB's Group Managing Director Patrick Hylton, dated July 2006, acting deputy Governor of the BOJ, Gayon Hosin, said: "It is proposed that AIC's ownership interests in financial services businesses not containing DTI's (deposit taking institutions) will be held by AIC Holdings (Barbados), along with ownership interests in non-financial services businesses.
"This would appear to run counter to the requirement that the restructuring should result in all the financial entities within AIC's regional group falling under a financial holding company and a segregation of the financial activities and risks from any non-financial/real sector activities," the acting deputy Governor said.
Governor of the Bank of Jamaica Derick Latibeaudiere declined comment when contacted.
"It is not the policy of the Bank of Jamaica to discuss entities supervised by the Bank.
I am not prepared in any shape or form to discuss any entity under the supervision of the Bank," he said in response to questions about NCB's majority shareholder. He also declined comment on the "fit and proper" controversy surrounding NCB's former Group CEO and trusted Lee-Chin adviser, Aubyn Hill, who was pushed out of NCB's executive suite after a long protracted war with Astaphan, the then deputy chairman of NCB Jamaica.
But as the accounts for Lee-Chin's private holding company show, Hill was a given a golden parachute.The accounts noted that the Barbados investment company transferred 6,274,263 NCB common shares to a former employee of NCB as "compensation upon termination."
The shares carried a fair market value of Can$2,870,148 at the time of transfer. NCB last year posted profits of US$86 million.
