A South American investor is the lone interested company in the now defunct Globe Trust and Investment Company Limited (GTICL) after two companies which had shown interest scrapped plans to reorganize the entity.
The South American investor which was not named was however unable to meet a November 30 deadline set by the Bank of Guyana (BoG) to submit an application to acquire control and now has until January 24, 2008 to make the relevant submissions.
During a press conference yesterday at the GTICL Middle Street office, Admin-istrator Conrad Plummer in a prepared statement explained that the South Americans were unable to make the November 30 deadline mainly because of travel commitments but came to Guyana in early December and because of travel issues and the upcoming holidays promised to return after January 5 with a team to verify if the quantum of investment was sufficient.
This investor, said Plummer, was also interested in investing in other sectors. Because the deadline was missed, the administrator on behalf of the investor sought an extension and after initially not granting it, the BoG changed its position and extended the deadline.
According to the Admin-istrator, once the investor can meet the deadline the BoG will then have to do its due diligence and if found fit and proper will take it further. The process has to come to an end, he said, either through an investor or through liquidation of GTICL. Earlier this year a North American investor, Hywhey Invest-ments Inc (HII) pulled out after it was unable to secure the funds required by the reorganization plan. HII was selected in 2006 after 93 companies had shown interest but only six were found suitable. Eventually HII was the only company in the running.
Plummer was also not too optimistic about the prospects for other potential investors. He mentioned that he did not believe that there are too many investors on the horizon beyond the current South American investor.
The two other companies that showed interest this year and eventually pulled out of the running were from Europe and North America.
Plummer noted that the Europeans advised in an email on November 29 that because of the complexities of the transaction they had decided not to take it further. The North Americans made an initial visit to Guyana and a team of three experts returned and performed a due diligence exercise after applying to the BoG. The company withdrew on December 17.
Full banking licence
Quoting from a statement on the reasons for the withdrawal by the investor, Plummer said: “Unfortunately, the current licensing regime of Globe Trust does not provide us with sufficient scope to participate effectively in the banking sector in Guyana. In our opinion, the restrictive nature of the license would impair our ability to be competitive and profitable and introduce new products and technology.”
The investor went on to say: “In as much as we recognize your position that it would not be prudent for the Bank to consider a change in the current categorization of Globe Trust at the present time, we believe that a full banking license is necessary to bring the institution to viability in the shortest possible time in accordance with our vision and strategic interests.”
The BoG was advised in July about at least one of these investors, the others were mentioned in late October.
The Central Bank had responded on November 5, advising that there should be closure of the reorganization process, that is, the submission of the Application to Acquire Control and the modification of the approved reorganization plan by November 30.
The current reorganization plan calls for an immediate investment of US$3.5M (and US$1.5M for infrastructural work if necessary). This plan was approved in the High Court on February 7 and there were no objections from the depositors in March.
Plummer said a lot of the loans of GTICL are in default and are unsecured, with 80% to 85% of the portfolio in the court.
Plummer explained that their borrowers are in three categories with the first category being those who come in and make payments (this group was said to be small), those that have to be pursued to make payments and the large majority which believe that Globe Trust will close before the court matter is completed and hence do not repay.
The GTICL savings account is $793M, with $721M in outstanding loans. However, $650M of this can be written down by GTICL based on the BoG guidelines, leaving a clean portfolio of some $70M plus. There are some 5,000-6,000 recorded depositors with 1300 persons having deposited in the educational trust fund.
In relation to the latter Plummer noted that “we have had to brave a lot of angry parents.”
If the investor is not approved by the Bank as required in Section 9 (1) of the FIA, then this would be grounds for the company to be liquidated.
Section 9 (1) states, “No person may without the prior written approval of the Bank (BoG) acquire control of any licensed financial Institution.”
Should liquidation become a reality Section 55 lists the order of priority of payments.
After the update Plummer thanked the stakeholders of GTICL for their patience and understanding, the remaining GTICL staff for their devotion, the BoG and the company’s attorney.
In accordance with the FIA of 1995, the BOG seized possession of GTICL in September 2001, and applied for the company to be liquidated, after a breach of the FIA was found. The court however ordered a reorganization.
