Receiver seeks US$1m deal for Western Cement - Despite raging court fights
Published:Friday | July 15, 2011 | 12:00 AM
Avia Collinder, Business Writer
KEN TOMLINSON, the receiver for Western Cement Company Limited, is soliciting offers for the assets of the company, including land and kiln, even as its previous owners wrangle with creditors in court over the forced takeover for unpaid debts.
Tomlinson has put a US$1.6-million (J$137 million) asking price on the table for the assets of the Maggotty, St Elizabeth-based company, a price that is one-fifth the sum that debenture holder Development Bank of Jamaica (DBJ) says it is owed.
The receiver said in a press advertisement that the successful bidder would be rewarded with the proceeds of an insurance claim for a damaged kiln amounting to US$600,000, which cuts the value of the transaction to a net US$1 million.
A Financial Gleaner source said the insurance claim for the kiln was recently settled.
A representative of the Western Cement shareholders, who asked not to be named because of the legal proceedings, expressed surprise at the advertised sale of assets.
Once engaged in the business of mining limestone and manufacturing caustic soda, an ingredient used in refining of bauxite to alumina, Western Cement has been in receivership for eight years, and ceased operation in 2006.
DBJ, which inherited the denture when DBJ was merged with National Investment Bank of Jamaica, said Thursday that the debt owing to NIBJ/DBJ, consisting of debt and preference shares, was J$718,737,980.10, at June 30, 2011.
The bank had no more comment, saying the matter is currently before the courts.
The Supreme Court hearings continue on July 25.
Western Cement shareholders are alleging conflict of interest and conspiracy against the company, which they said was the rival of another operation company connected to former NIBJ officials.
The two entities produced quicklime.
Partners David Wong Ken, Jack Koonce, and Shirley Shakespeare, are demanding US$31.3 million as compensation for economic loss from NIBJ, Clarendon Lime Company, Limestone Corporation of Jamaica, Vincent Lawrence, Horace Clarke who is now deceased, Cezley Sampson, and Vinroy Gordon.
Another US$4.3 million in exemplary damages is also being sought against Lawrence, Clarke and NIBJ on allegations of "conspiracy".
The NIBJ, which put the now-defunct Western Cement into receivership in 2003, is in turn seeking interest of 12 per cent on unpaid debt, going back to June 2006, relating to guarantees the investment bank said they signed in 1995.
Consortium loan
Court documents in a separate case indicate that Western Cement investors Cartade, Koonce and Shakespeare, were parties to a consortium loan agreement (CLA) on October 20, 1995, with Trafalgar Development Bank (TDB), Island Victoria Bank (IVB), Mutual Security Bank Ltd (MSB) and Capital and Credit Merchant Bank (CCMB).
Under the CLA, the document notes, Western Cement received loans totalling US$1.941 million and J$14 million from the consortium of lenders, with TDB as the lead bank.
The loan was guaranteed by Koonce and Shakespeare.
Under a mortgage clause in the insurance policies made pursuant to the CLA, TDB had authority to receive, apply and dispose of insurance proceeds payable to the consortium by Western Cement's insurers.
The financing arrangement fell apart on June 8, 2002, when Western Cement's kiln was damaged during torrential rains and lightning storms.
The documents state that the insurers, AHI Co and West Indies Alliance Co, were notified of the damage through brokers. Claims were submitted by Western Cement amounting to US$650,000 but AHI denied payment.
"West Indies Alliance Co whilst denying liability decided, however, to make an ex-gratia payment in the sum of US$325,000 in respect of the claim. By letter dated 18 June 2002, Western Cement wrote to TDB requesting that the consortium of lenders authorise the insurer to pay over the US$325,000 to it, so that repairs could be carried out to the kiln," the court documents said.
Arising from the insurance dispute, the damaged kiln was not repaired. Western Cement was unable to function and was eventually put in receivership.
Well-placed sources say the US$600,000 insurance proceeds mentioned in the advertisement were neither related to the CLA case nor the conspiracy lawsuit.
NIBJ acquired the Western Cement debt in May 2003 when TDB and CCMB, by virtue of a deed of assignment, transferred all rights, title and interest, to the state-owned investment bank.
TDB was later absorbed into Pan Caribbean Financial Services (PCFS); IVB and MSB assigned their respective rights under the CLA to bad-debt collector Dennis Joslin Jamaica Inc, the predecessor to Jamaica Redevelopment Foundation Inc (JRF).
Cartade, Koonce and Shakespeare sued PanCaribbean, JRF and NIBJ in the Supreme Court on August 16 2006 for losses suffered. The partners won a procedural victory in February 2011 but the substantive case is still to be decided.