Trinidadian businessman Arthur Lok Jack, a key shareholder in Guardian Holdings Limited, GHL, is giving consideration to adjusting a three-year loan arrangement with NCB Financial Group in a bid to appease the finance ministry in Trinidad and Tobago and close the long-standing takeover deal that awaits regulatory approval.
Notwithstanding the dramatic twists and turns in NCB’s takeover bid for GHL, the bank’s stock price rose about one per cent at midweek.
Both Lok Jack and the banking group telegraphed that they are weighing the concerns of regulators over a vendor loan that key GHL shareholders had committed to NCB as part financing for the acquisition of minority GHL shares, and were seeking to comply.
NCB, the largest and most profitable banking conglomerate in Jamaica, ultimately owned by Michael Lee-Chin, wants to increase its stake in Guardian, the largest insurance company in Trinidad, by 32 per cent to 62 per cent. The latest offer closes on April 30, or 15 months after the deal to buy more shares was initially announced.
The ministry wants Lok Jack and the Ahamad family, the other key shareholder, to receive cash for the sale of shares, rather than offering a three-year loan valued at US$45 million. in lieu of payment.
The absence of a cash transaction would breach the Foreign Investment Act, according to Finance Minister Colm Imbert.
“The key shareholders would adhere to this requirement, thereby complying with the letter of the law,” said Lok Jack on Tuesday.
Lok Jack said that there are different opinions as to how this could be transacted. The simplest way would be a set-off, that is, NCB pays the key shareholders US$45 million less for their residual shareholding and issue a debt instrument to the key shareholders for US$45 million, which would be paid over 36 months at 6.5 per cent interest.
This is not dissimilar to a person selling a property and giving a mortgage to the buyer, he added. “In other words, the key shareholders would not have to receive the US$45 million in cash and then lend it back to them on the same day, which is, in effect, an exchange of cheques,” he said.
He acknowledged that the finance ministry appeared not to be in agreement with the set-off, but wants the key shareholders, be compensated for their holdings in the same manner as other minority shareholders.
NCB Financial says it is awaiting more detailed instructions from the ministry to determine its next course of action.
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