It is now a matter of public record, the views of the Clico Policyholders Group's (CPG) on the machinations of former Lascelles de Mercado (LdM) managing director, William Mc Connell and his company, Black Sand Acquisition Inc with regard to his offer to buy back the publicly-listed company for US$370 million or about half of the US$672 million price for which it was sold to CL Financial (CLF) in 2008 and as such requires no further comment. However, there are some broader issues that are in the interest of all stakeholders to which we would like the current chairman of LdM and its ultimate parent company CLF, Mr Gerard Yetming to respond. We are advised that CLF's investment in LdM represents 87 per cent of the ordinary shareholdings and 97 per cent of the preferred stock aggregating to just over 90 per cent of the voting rights of the company.
LdM is involved in a wide cross-section of activities including but not limited to liquor, rums, wines and sugar; wholesale and retail merchandising; general insurance; investments; and transport services. There is an external debt (via notes) in the sum of about US$342 million which was incurred by CLF to fund the initial acquisition of company and it is at present secured by LdM shares. LdM according to its audited financial statements continues to be profitable (posting net profit of US$36 million in 2010) with virtually no debt or encumbrances. Our question is, therefore, what has happened to the strategic options that were purportedly being pursued by the previous Board in respect of the following:
• Possible strategic merger of both LdM and Angostura Holdings Ltd (AHL) from the perspective of rationalisation of duplicated costs within the two sprits businesses and the listing of the merged entity on both the JSE and the TTSE.
• A rights issue of shares post merger with proceeds going towards a substantial reduction of AHL debt burden.
• Sale of non-spirits assets owned by LdM (ie Globe Insurance, Carrearras, GOJ Bonds, Motor vehicle dealerships investments etc). Our back of the envelope calculation suggests that these can yield upwards of US$100 million that could be directed to reducing the existing notes obligations.
• Possible sale of existing shares to an international strategic partner.
We are also advised that both LdM and AHL have great long term strategic interests with respect to the dominance they command in the international and local markets for their brands (Appleton Wray & Nephew, Angostura Bitters etc) which once rationalised can substantially enhance shareholder value. It therefore further begs the question why hasn't this been done and what are the obstacles whether real or imagined that are impeding this process? We are further advised that as far back as 2010 it became very clear that the aforementioned US$320 million worth of notes (debt) issued by CLF to finance the LdM acquisition was going to slip into default. However, the note holders were persuaded to extend the debt to early 2011.
Noteholders received assurances that the company was now squarely in the control of the Government of T&T and steps were to be taken to liquidate assets as necessary in order to retire the debt. In January 2011, the noteholders were again asked to hold their hand until July 2011, again with promises of pending asset sales. It is noteworthy that the notes continue to cost the company a staggering 12 per cent, at a time when US interest rates have fallen to almost zero. Our question is, therefore, even now in the face of an imminent threat that the LdM shares could be forfeited and the company taken over: why is it that the LdM Board is still taking this long to do the obvious, which is to come up with a mutually acceptable proposal that would see the restructuring of the notes both in terms of a longer repayment period and reduced coupon/interest rate?
Peter Permell
Chairman
Via e-mail