Note­hold­ers of com­pa­nies con­trolled by Ja­maican-Cana­di­an in­vestor Michael Lee-Chin are be­ing asked to ap­prove sweep­ing changes to the re­pay­ment struc­ture of more than US$364 mil­lion in out­stand­ing debt tied to his hold­ing en­ti­ties.

A for­mal bal­lot re­quest was reis­sued on Thurs­day on the Ja­maica Stock Ex­change (JSE) web­site by JCSD Trustee Ser­vices Ltd, the trustee, invit­ing note­hold­ers to vote on key pro­pos­als af­fect­ing bonds is­sued by AIC (Bar­ba­dos) Ltd, Port­land (Bar­ba­dos) Ltd (PBL), and Spe­cial­ty Cof­fee In­vest­ment Com­pa­ny Ltd. The 14 notes from the three com­pa­nies con­trolled by Lee-Chin are col­lat­er­alised by 1.06 bil­lion of his shares in NCB Fi­nan­cial Group Ltd (NCBFG), the Kingston, Ja­maica-head­quar­tered com­pa­ny chaired by Lee-Chin, its largest share­hold­er.

On Thurs­day, NCBFG trad­ed on the Ja­maica Stock Ex­change at J$30.37 a share. That puts the val­ue of the col­lat­er­al at US$200.52 mil­lion (J$32.28 bil­lion), some US$164 mil­lion less than the debt it is sup­posed to cov­er. The dif­fer­ence in the col­lat­er­al cov­er­age is one of sev­er­al ar­eas of for­bear­ance that the is­suers are ask­ing the note­hold­ers to vote on.

“There con­tin­ues to be an event of de­fault in the pay­ment of in­ter­est and/or prin­ci­pal due on the rel­e­vant notes (in­clud­ing the note here­in). Sev­er­al note­hold­ers across the rel­e­vant notes have ex­pressed a de­sire to en­gage in ne­go­ti­a­tions with the is­suers with a view to ne­go­ti­at­ing im­proved and com­pre­hen­sive terms in con­nec­tion with the pro­posed re­struc­tur­ing of the rel­e­vant notes,” said An­drea Kel­ly, gen­er­al man­ag­er of JCSD Trustee Ser­vices Ltd, in the bal­lot re­quest to note­hold­ers.

In the amend­ed and re­stat­ed pre­lim­i­nary of­fer­ing mem­o­ran­dum for the US$300 mil­lion NCBFG at­tempt­ed to raise in Ju­ly, the fi­nan­cial hold­ing com­pa­ny stat­ed:

“Ap­prox­i­mate­ly 50.5 per cent of our out­stand­ing shares, con­trolled or ul­ti­mate­ly held by our con­trol­ling share­hold­er and chair­man, Michael A. Lee-Chin, are pledged as col­lat­er­al to se­cure bonds is­sued by com­pa­nies ma­jor­i­ty-owned by Lee-Chin, in­clud­ing AIC, AIC Glob­al and Port­land Hold­ings Inc.

“As of the date of this of­fer­ing mem­o­ran­dum (Ju­ly 21), cer­tain of these bonds are delin­quent with re­spect to prin­ci­pal and in­ter­est pay­ments. A plan has been sub­mit­ted to the rel­e­vant bond­hold­ers for ap­proval, seek­ing a de­fer­ral and re­struc­tur­ing of the af­fect­ed pay­ment oblig­a­tions. Ap­proval of the plan by the bond­hold­ers re­mains pend­ing. Giv­en the delin­quen­cies, and con­sid­er­ing the pos­si­bil­i­ty of fu­ture de­faults, en­force­ment of the re­lat­ed se­cu­ri­ty in­ter­est could re­sult in our con­trol­ling share­hold­er and chair­man los­ing con­trol of the Group with­out the con­sent of our oth­er share­hold­ers or note­hold­ers.”

The pro­posed re­struc­tur­ing spans both USD and JMD-de­nom­i­nat­ed oblig­a­tions, in­clud­ing:

* AIC (Bar­ba­dos): US$161.43 mil­lion and J$2.2 bil­lion (US$13.66 mil­lion);

* Port­land (Bar­ba­dos): US$164.21 mil­lion and J$320 mil­lion (US$2 mil­lion); and

* Spe­cial­ty Cof­fee In­vest­ment: J$3.725 bil­lion (US$23.14 mil­lion)

Ne­go­ti­a­tions be­tween is­suers and bond­hold­ers have been on­go­ing for over a year, trig­gered by missed in­ter­est pay­ments and de­layed prin­ci­pal re­demp­tions.

For­bear­ance re­quest­ed

The note­hold­ers are now be­ing asked to vote on post­pon­ing prin­ci­pal re­pay­ments un­til De­cem­ber 31, 2027. The note­hold­ers are al­so be­ing asked to vote on for­bear­ance for col­lat­er­al cov­er­age and con­tract­ed in­ter­est rates, push­ing that back to De­cem­ber 31, 2027. Any short­fall in in­ter­est would be cleared by the ex­tend­ed ma­tu­ri­ty. Ap­proval re­quires a 75 per cent su­per­ma­jor­i­ty of vot­ing bond­hold­ers.

The pro­pos­al is part­ly an­chored in ex­pect­ed cash flows from NCBFG. Div­i­dend pro­jec­tions an­tic­i­pate:

• ↓2025: J$2.52 bil­lion (US$15.65 mil­lion)

• ↓2026: J$4.48 bil­lion (US$27.83 mil­lion)

• ↓2027: J$6 bil­lion (US$37.27 mil­lion)

“On De­cem­ber 31, 2027, the pro­pos­al made by the is­suer would have been in ex­is­tence for 2.5 years, by then the track record of div­i­dend pay­ments would re­turn con­fi­dence to the mar­ket­place, giv­ing pay­ment op­tions in­clud­ing some ex­ist­ing note­hold­ers rolling, new note­hold­ers re­plac­ing ex­ist­ing note­hold­ers and sale of NCBFG shares to re­pay debt.

“All these op­tions are not avail­able to­day, hence the re­quest­ed for­bear­ance giv­ing the is­suer time to re­turn to nor­mal­cy in the mar­ket­place,” a doc­u­ment is­sued by Port­land (Bar­ba­dos) Ltd, which is re­flec­tive of the two oth­er com­pa­nies, in­di­cat­ed.

Note­hold­ers are al­so be­ing asked to green light the for­ma­tion of a ne­go­ti­at­ing com­mit­tee com­posed of three in­di­vid­ual note­hold­ers ap­point­ed by the JCSD, one over­seas note­hold­er se­lect­ed by the JCSD and one rep­re­sen­ta­tive each from Sagi­cor In­vest­ments Ja­maica Ltd, Bari­ta In­vest­ments Ltd, VM Wealth Man­age­ment Ltd, JMMB Se­cu­ri­ties Ltd and GK Cap­i­tal Man­age­ment Ltd.

The com­mit­tee would ne­go­ti­ate on be­half of all note­hold­ers, though it will not have bind­ing au­thor­i­ty on any in­di­vid­ual in­vestor. Should an agree­ment be reached, each bond­hold­er group would vote on whether to ac­cept or pur­sue en­force­ment. If talks fail by Oc­to­ber 31, an ex­ten­sion may be sought by the com­mit­tee.

Vot­ing closed on Ju­ly 31, with each US$10,000 in nom­i­nal val­ue equiv­a­lent to one vote. Lee-Chin signed an ini­tial pro­pos­al to note­hold­ers dat­ed May 22.

Lee-Chin’s AIC faced a sim­i­lar cri­sis in 2009, when the com­pa­ny missed the re­pay­ment on US$42 mil­lion in bonds. At the time, AIC owed US$155 mil­lion, backed by 36 per cent of NCB shares, NCB Tow­ers, and a 20 per cent stake in Colum­bus Com­mu­ni­ca­tions. AIC even­tu­al­ly re­solved the is­sue but at a steep in­ter­est cost of 13.25 per cent.

Con­cerns raised

Lee-Chin’s fi­nan­cial sit­u­a­tion has drawn at­ten­tion from Caribbean reg­u­la­tors. In Cu­raçao last month, Fi­nance Min­is­ter Javier Sil­va­nia wrote to the Cen­tral Bank of Cu­raçao and Sint Maarten (CBCS), rais­ing con­cerns about NCBFG’s con­trol of Guardian Hold­ings Ltd (GHL), which owns the largest pri­vate in­sur­ers in both Cu­raçao and Sint Maarten.

Sil­va­nia took to Face­book, pub­lish­ing videos and posts on Lee-Chin, and has re­quest­ed a for­mal re­sponse from CBCS Pres­i­dent Richard Doorn­bosch with­in ten work­ing days.

Back in Oc­to­ber 2023, Kam­la Per­sad-Bisses­sar, then Leader of the Op­po­si­tion and now Prime Min­is­ter, al­so ques­tioned the fi­nan­cial en­tan­gle­ment be­tween NCBFG and Guardian Hold­ings Ltd (GHL), de­scrib­ing it as a sys­temic risk. NCBFG owns 61.77 per cent of GHL, which is the largest in­sur­ance com­pa­ny in T&T.

NCBFG’s at­tempt to raise cap­i­tal in the in­ter­na­tion­al bond mar­ket fell short, se­cur­ing US$225 mil­lion against a US$300 mil­lion tar­get. The new five-year, se­nior se­cured bond, backed by all of its GHL shares, was priced at 11 per cent—well above pri­or un­se­cured USD debt priced at 8.00 to 8.50 per cent.

Of the US$225 mil­lion raised, US$173.51 mil­lion is held in es­crow, ear­marked for re­pay­ment of old­er debt ma­tur­ing be­tween 2026 and 2028, at in­ter­est rates rang­ing from 7.50 to 11.50 per cent.

This debt shuf­fle has re­sult­ed in NCBFG trad­ing old­er, cheap­er debt for new­er, more ex­pen­sive bor­row­ings, with US$196.26 mil­lion in oblig­a­tions due with­in five months, and over US$100 mil­lion ma­tur­ing in 2026.

“Con­cur­rent­ly with this of­fer­ing, the is­suer is work­ing on re­fi­nanc­ing short-term fa­cil­i­ties with ma­tu­ri­ties of two to five months and bear­ing in­ter­est rates rang­ing from 6.75 per cent to 8.50 per cent per an­num in the lo­cal and re­gion­al mar­ket and is cur­rent­ly in dis­cus­sion with its lo­cal and re­gion­al in­vestor base,” the bond mem­o­ran­dum out­lined.

Since Lee-Chin’s re­turn from his leave of ab­sence in Ju­ly 2023, NCBFG has seen an un­der­sub­scribed eq­ui­ty raise, an un­der­sub­scribed bond is­sue, and two failed as­set sales. The com­pa­ny’s share price has de­clined by more than 50 per cent, erod­ing re­turns for re­tail and in­sti­tu­tion­al in­vestors—in­clud­ing the 1,600 share­hold­ers on its T&T reg­is­ter.