Material $45 million non-disclosure
Posted: 27/11/2009 - 10:27 AM
Author: Adele Ramos - adelescribe@gmail.com
The takeover of Belize Telemedia Limited (BTL) by the Government of Belize on August 25, 2009, was hailed by a majority of Belizeans as a brave and just move by the Barrow administration in the face of an onslaught of litigation by the Ashcroft group of companies; but amid those voices of endorsement were also murmurs of skepticism – some questioning whether this move was not just another one of those “whaps” politicians pull over Belizeans for their campaign financier, British billionaire Michael Ashcroft.
Prime Minister Dean Barrow has gone on record to try to allay some of this skepticism; however, new questions came to the fore late last week, after the Government of Belize issued a press release which, while intending to refute a Reporter headline (BTL in arrears) earlier in the week, disclosed for the first time that in addition to acquiring the shares held by the Ashcroft group of companies in BTL, it had also taken full control of the debt BTL had with the Belize Bank.
The story from Mr. Barrow is that Government acquired the debenture, but acquiring that debenture also means that Government has to pay the Belize Bank its due. The next half of the equation is that BTL should reimburse whatever Government pays the bank—at least theoretically
Even though the acquisition of the BTL-Belize Bank debt instrument took place on August 25, first word came to the public nearly three months later, in GOB’s November 18, 2009 press release, and only as a reaction to the Reporter story. The release did not say that BTL is expected to reimburse the government for paying the Belize Bank – a material omission.
By GOB’s own declaration, the news article in dispute points out that the Government of Belize, via the nationalization of BTL, “took over the loan and its responsibilities.”
Said the government release: “That is indeed the case and the mortgage debenture securing the loan was expressly acquired from the Bank by the government of Belize.” [Emphasis ours.]
Nowhere in the Government’s release did it say that BTL retains ultimate responsibility for repaying the loan. Neither did BTL’s chairman, Net Vasquez, give this assurance when we spoke with him Wednesday night, November 18, while we were trying to meet our press deadline.
The assertion that BTL would pay GOB for payments towards the Belize Bank debt was not made until after our article hit the streets and Senator Godwin Hulse publicly declared a violation of the Finance and Audit (Reform) Act, after a logical deduction that taxpayers are footing the $45 million bill, since up to that point, there was no declaration that BTL would repay the government.
We find it interesting that even though there was no public announcement, claiming that GOB was acquiring the mortgage debenture, and even though the order did not explicitly say so, the Ashcroft operatives at the Belize Bank somehow understood, because, according to Prime Minister Barrow, the bank had already put in its claim for compensation for the $45 million debenture. (At the same time, however, the bank is pursuing BTL for the debt.)
The Belize Bank debt, and the fact that the deal placed BTL’s core assets under Ashcroft’s control, was a central concern to our newspaper at the time of the nationalization of the company. The record will show that we probed the issue, but did not get the explanation we are now getting regarding that loan.
As we indicated in “Greedy choke puppy”, subtitled “Belize Bank holds asset mortgage” (August 25, midweek Amandala), and we quote:
“The question of control over BTL’s assets has not yet formed a part of the takeover discussions.
“We know that in July 2007, BTL had secured a mortgage for US$22.5 million (repayable in four years) from the Turks and Caicos branch of the Belize Bank, a sister company. As a part of that deal—a first priority mortgage, meaning that the bank has first call on the assets—some key BTL assets had been mortgaged to the bank, including the company’s headquarters — the Esquivel Telecom Center, located on St. Thomas Street, and also the Albert Cattouse Building in downtown Belize City, among other properties.
“The loan, according to BTL’s financial statements, is also guaranteed by certain BTL subsidiaries. Final installment is due in July 2011.”
Again, we raised the issue in a subsequent article, “BTL looted!” (August 27, weekend Amandala), when we interviewed BTL chairman Vasquez on Thursday, August 27, as the $45 million debt was, to us, a most important dimension of the whole takeover.
We wrote: “Of note is that BTL has two major outstanding debts: a $19.2 million loan with the Government of Belize for the acquisition of Intelco assets – a loan tied to the disputed accommodation agreement, which has led to a legal dispute between the Government of Belize and the Ashcroft group of companies, and a $45 million loan (US$22.5 million) with the Belize Bank branch of Turks and Caicos, which BTL claimed it got to purchase some shares formerly held by [Jeff] Prosser and also to make capital investments.
‘“Last word was that BTL had stopped paying the [Government] loan... If that is still the case, the payments will have to be resumed,’ said Vasquez.
‘Of note is that several of BTL’s key assets, including the company’s headquarters on St. Thomas Street, are mortgaged to the bank under that loan.
‘“As far as I know, nothing has been paid on that [Belize Bank] loan... First payment was due June/July of 2009. I believe the company asked for an extension of time,’ said Vasquez, adding that the entire amount, $45 million, as far as he knows, remains due to the Belize Bank.
‘“The board is very much aware of that and will be looking at that as well,’ he added.”
Vasquez was clearly indicating that at two days into the government takeover, the Belize Bank debt was still BTL’s responsibility to settle, as was the case with the Intelco loan which GOB had previously acquired under the Musa administration. (More on that later.)
If the acquisition of the BTL debt to the Belize Bank was central to the nationalization strategy – it would be useless for Government to take control of the company from Ashcroft in an adversarial environment but leave him with essential assets – then at the very least the Chairman should have been let in on this strategy.
The hitherto undisclosed (secret) dimension of the takeover was guarded from the public and disclosed only last Wednesday, when GOB found it necessary to dispute the Reporter article claiming that BTL was in arrears with the Ashcroft bank.
Senator Godwin Hulse, after reading our account on the recent disclosure, took issue with the fact that Government had acquired the BTL debt without having gotten National Assembly approval for it. Indeed, the only money talk we’ve heard linked to the nationalization were estimates on the value of BTL — BZ$300 million, as claimed by GOB, versus US$300 million, as claimed by Ashcroft’s camp. Nowhere in those talks did anyone speak of the $45 million loan by the Belize Bank.
When Amandala interviewed Prime Minister and Minister of Finance Dean Barrow on Monday, he indicated that after BTL got the US$22.5 million loan from the Belize Bank, all the company’s assets were mortgaged to the bank, and leaving the debenture with the bank at the time of nationalization would have placed BTL’s assets at risk—an understandable position, but one that is new to even well-informed observers who have been keen on the developments.
Not explaining Government’s intention for the Belize Bank debt, we submit, amounted to a material non-disclosure that, it appears, would not have been remedied were it not for Government’s attempts to challenge the aforementioned news article.
There is no written agreement between the government and BTL governing how the $45 million debt (now to GOB) would be settled, Chairman Vasquez had told Amandala.
Prime Minister and Minister of Finance, Dean Barrow, told Amandala Monday night that the government has not acquired BTL’s debt, but has instead taken over the mortgage debenture, therefore stepping in the place of the Belize Bank as creditor. The contention remains that GOB (or BTL) needs to pay Ashcroft’s Belize Bank for the $45 million loan.
Prime Minister Barrow calls the payment “compensation,” but he has advised us, to clear up the omission from last Wednesday’s government press release, that BTL would reimburse the government its money, meaning there should be no net loss to taxpayers.
The takeover of BTL was effected by a two-step legislative process, whereby the Barrow administration proposed an amendment to the Telecommunications Act, and then followed with an order stipulating the terms on which the BTL takeover would happen.
What exactly was GOB acquiring?
The order (Statutory Instrument 104 of 2009) was careful to list all the shares the government was acquiring and from whom those shares were being acquired (detailed in part 1), but “other property acquired” (part 2) was not detailed.
Part II said that the government was also acquiring “all proprietary and other interests held by The Belize Bank (Turks and Caicos) Limited in Belize Telemedia Limited and its subsidiaries under the mortgage debenture dated the 31st December 2007 (including any amendments thereto) executed between Belize Telemedia Limited as the Mortgagor and The Belize Bank (Turks and Caicos) Limited as Mortgagee, and registered in the Companies and Corporate Affairs Registry, Belmopan, on or about 8th February 2008.”
Clearly, this is not language that a layperson can understand, and the government, at the time of the BTL takeover, did not explain what it was doing in taking control of BTL’s assets and the accompanying debenture.
A similar (but more complex) arrangement, as we reported back in 2007, had happened with the Intelco fiasco, whereby the then administration of Said Musa had paid off some foreign debts for Intelco, and Government later entered into an arrangement with BTL to purchase those assets for $19.2 million. That transaction was still listed on BTL’s last financials (2008).
The fact is that the government paid for Intelco’s foreign debt, and BTL has an outstanding bill with the government for that Intelco transaction.
The Prime Minister’s August 24 speech introducing the bill for the takeover of BTL did not mention the Belize Bank loan/debenture, and furthermore, did not specify that Government’s intention was to “save” the assets of BTL from possible confiscation by the Ashcroft group.
Barrow has assured our newspaper this week, contrary to the perception created by the Government press release of November 18, that taxpayers will not foot the bill for BTL’s $45 million debt.
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