Globe Insurance Company took up J$25 million of the US$40 million bond that CL Financial group floated last year to help finance closing costs on the acquisition of Globe's parent Lascelles deMercado.

But the new owners who made the disclosure this week are downplaying the investment, saying the exposure to CL Financial's troubles was minimal and that there was no interruption in servicing the debt.

"It is a contractual arrangement which must be met and the inherent value of the security is solid," said Michael Carballo, Angostura's executive director and financial head and a director of Lascelles, responding to the query of a shareholder.

At the same time, however, Carballo said the group had decided to hold off on the merger of Lascelles businesses with the CL Financial companies, keeping the assets separated until the parent's financial troubles had been cleared up.

"We still have the dream to marry spirits of Angostura and Lascelles but have to wait for the market to settle/recover," said Carballo.

But he also said that CL Financial may be faced with the possibility of disposing of a part of its spirit business.

"We may not be able to carry on all of the spirit operations, for example, while we may secure Angostura and Lascelles we mayhave to dispose of Europe and the United States to help deal with the situation," he said.

Currently CL Financial has debt amounting to approximately US$340 million outstanding from the acquisition of Lascelles deMercado, split between US$100 million in Jamaica and US$240 million in Trinidad, Carballo disclosed at the annual general meeting of Lascelles deMercado.

"... And we are still working through how to deal with this," Carballo told shareholders at Lascelles' annual general meeting Tuesday.

Carballo chaired the meeting in the absence of chairman Lawrence Duprey who was said to be off in Europe on group business.

Bond subscription

Globe, the one and a half century old commercial property and liability insurance company, became a part of the CL Financial group on its 86 per cent purchase of Lascelles shares last year.

William McConnell, group managing director, said John Issa, Charles Levy and Herbie Edwards, all directors of Globe, were on an investment committee that made the decision for Globe to invest in the bond.

McConnell is the chairman of Globe.

Evan Thwaites, chief executive officer of Globe, later declined to comment further on the bond subscription last June, a deal which essentially saw the insurance company contributing a $25 million loan towards the purchase of its own parent, and ultimately itself.

But analysts also say that were CL Financial to find itself unable to service the debt, Globe as a bondholder would be in a position to grab some of the Lascelles shares that backed the bond.

Lascelles also faces further exposure from CLICO, the CL Financial operation that has crippled itself by taking on too much debt backed by illiquid assets, and which now owns a piece of the Jamaican conglomerate - 2.494 million shares, which gives it a 2.6 per cent block of the ordinary shareholdings.

Still, at the AGM Tuesday, Carballo again declared that it was business as usual, and insisted Lascelles and its companies were safe from any takeover by CL Financial's rescuer, the Trinidad Government.

Trinidad, however, has not given that assurance, saying the government would be going after the high quality assets after it untwines the group's business dealings, which would be sold to infuse three troubled companies - CLICO, CLICO Investment Bank and British American Insurance Company - with fresh capital where needed.

Lascelles was bought chiefly through spirits company Angostura Limited.

New company created

The majority of the holdings are reposited in CL Spirits Limited, a new company created for the acquisition, which holds 68.62 million shares; Calla Lilly Holdings Limited, which was acquired by the CL Financial group when it purchased Lascelles, with 9.5 million shares; Angostura, 2.78 million shares; while CLICO holds a 2.49 million block.

The CL Financial group through ordinary shares and prefs command 92 per cent of the votes.

Globe, a profitable general insurance company, whose last reported figures were up to 2007, has gross premium income totalling $2.2 billion representing an 11 per cent increase at the end of the financial year December 2007.

The company last reported profitof $284 million, down from $377 million in 2006.

The insurance company is already heavily invested in securities, holding a $1.8 billion of government bonds, repos, corporate bonds and equities in its investment portfolio, that represented some 40 per cent of total assets of $4.4 billion reported on its December 2007 balance sheet.

Returns from its investments provided the company with $288 million in 2007, up from $255 million the year before.

Lascelles reported this week that its general insurance segment grew revenues by 10 per cent and pre-tax profits by 17 per cent.

Carballo and Thwaites both say that Globe is inured from CL Financial's troubles.

"There is no impact on Globe that could bring to bear," Carballo said, while Thwaites said separately there was no operational connection.

Lascelles which deals pre-dominantly in wines and spirits, had another record year of profits, which rose by more than $400 million to $3 billion at year end September 2008, even with impairment losses of $200 million in its sugar operations due to storm damage to its canes, and a $554 million decline in profits in the broader spirits and sugar segment.

sabrina.gordon@gleanerjm.com

Lascelles deMercado's head office on Dominica Drive in New Kingston.