William McConnell, managing director of Lascelles deMercado and Company. - Ricardo Makyn/Staff Photographer

Jamaican investors could be exposed for as much as US$40 million from a bond that Lawrence Duprey's tottering CL Group raised on the local market last June to help finance its US$700 million acquisition of Lascelles deMercado.

Yesterday, NCB Capital Markets/NCB, which floated the 9.25 per cent instrument on behalf of CL Spirits St Lucia Ltd, said 90 investors took up the US$40 million offer that was guaranteed by CL Financial group and Angostura Holdings Limited.

"The debt is current and we have been assured by the principals of CL Financial that debt servicing arrangements, as prevously arranged, will continue," said Chris Williams, managing director of NCB Capital Markets.

Williams said late last night that NCB would not disclose the banking group's own exposure to the bond issue, nor was it it at liberty to name its partners.

Financial troubles

William 'Billy' McConnell, the Lascelles CEO, said he, too, had received word that the Jamaican operation would in no way be affected by the financial troubles of Clico and CL Financial group, whose debts Trinidad's central bank is in the process of unravelling.

It was clear Tuesday that even Lascelles wanted reassurance about the future, following the Trinidad government's announcement that it was likely that certain assets of CL Financial would be taken over under the bailout plan still unfolding in Port-of-Spain.

"At 10:25 a.m., we heard from Trinidad," said McConnell, who spoke about an hour later to Wednesday Business. The message, he said, was as follows: "With respect to Lascelles deMercado, it is clear that it is business as usual. Nothing changes for LdM as the parent company seeks to work out its financial arrangements."

Grey area

McConnell said he has since conveyed the message to staff in the group.

Analysts were somewhat wary of commenting on the development, saying it remained a grey area.

Still, Mark Croskery, the CEO of Stocks and Securities Limited, said while it was unclear how bad the scenario was, disclosures to date indicate that CL's Spirits holdings - Angostura and Lascelles - were not caught up in it, at least not yet.

Croskery is not discounting that that could change, but said: "We, SSL, do not see a default issue here ... even if that has not been made clear in announcements thus far."

He adds: "Overall, the spirit side needsdisclosure by CL and the regulators. The stock exchanges should request clarification here immediately if it has not done so already."

Among Lascelles de Mercado's holding is J. Wray and Nephew, the distillers and blenders of the Appleton range of rums, and it was that jewel that was primarily in Duprey's sight when he used Angostura Ltd, the Trinidad and Tobago distiller, for the foray into Jamaica.

Global Insurance Ltd, another Lascelles subsidiary, was another fit for the CL Financial, which subsequently created CL Spirits to hold the 86 per cent of Lascelles it acquired last year.

The acquisitions was paid for in two tranches in a deal finalised at the end of July 2008.

Angostura ended up paying a discounted US$9.25 per share, instead of US$10.65 per share initially offered for the 96 million ordinary Lascelles shares in issue.

At finalisation of the deal, CL Financial had acquired 86.89 per cent of the ordinary shares and 97.15 per cent of the prefs - an aggregate of 92.01 per cent of voting rights.

Chairman Lawrence Duprey said in January 2008, during a visit here, that the acquisition was likely to be financed by 40 per cent equity and 60 per cent debt.

The CL Spirits bond, launched a month ahead of the deal's closure on July 28, 2008, was backed by Lascelles shares, with proviso that a loan to value ratio of 60 per cent be maintained.

Lascelles shares are now trading at $450 per share - down from a high of $605 last year - which, according to the schedule, means CL Financial has to put up about 12.75 million Lascelles shares as security. That translates to about 15 per cent of the 82.56 million ordinary shares CL owns.

Bondholders will have 45 per cent of their principal investment redeemed in another year - or 18 months from the June 2008 issue - and can also opt for full redemption of principal, but only if NCB and its financial partners also choose, in the latter case, to do likewise.

lavern.clarke@gleanerjm.com

Appleton Estate's Jamaica Rum 21. The rum is produced by Wray and Nephew, whose Appleon brand was a sought-after asset in Angostura/CL Financial's acquisition of Lascelles deMercado, the parent of Wray and Nephew.

Chris Williams, managing director of NCB Capital Markets, the lead arranger and part of an NCB syndicate that handled the CL Spirits bond float in June 2008. - File