An assortment of Walkerswood spices.
The consortium leading the rescue of spice maker Walkerswood still has two roadblocks to hurdle, and is now engaged in negotiations with, it appears, two former financiers of the St Ann-based company.
Ian Garbutt's Associated Manufacturers Limited (AML) and Facey family-controlled Pan Jamaica Investment Trust is yet to convince state-run Ex-Im Bank and the Environmental Foundation of Jamaica (EFJ) to accept its full offer, crafted to give the consortium 90 per cent of Walkerswood Partners Limited (WWP).
The consortium or 'rescue syndicate' also includes a third group represented by Howard Mitchell.
"A lot will depend on reaching a satisfactory agreement with these two. If not, the investors are not obliged to invest in Walkerswood," said a source close to the talks but who spoke on condition of anonymity.
Disagreements on terms
EFJ and Ex-Im are two of four partially secured creditors of Walkerswood, whose debts of $1.2 billion have hobbled the company.
On Tuesday, Ex-Im's Managing Director Pamela McLean, citing a previous undisclosed grievance with a Gleaner reporter, refused to speak to this newspaper. Chairman 'Butch' Hendrickson was off the island and unavailable for comment.
But Garbutt said the state-owned lending agency, which is owed $50 million, is unhappy with the terms of the offer. This would see Ex-Im and other creditors being paid off within 10 years under a profit-share arrangement.
Ex-Im, he said, has been offered, and has accepted 30 cents on the dollar for every dollar of debt owed, but wants to share in profits of Walkerswood into perpetuity and is also pushing for the remaining debt to be converted into US dollars.
"Ex-Im Bank has been the major sticking point since September. We have been going back and fourth since then," said Garbutt.
Board changes
AML is handling the Ex-Im talks, while Pan Jam is leading the negotiations with EFJ.
"To say anything would be premature until all negotiations are finished," said Paul Hanworth, director of Pan Jamaica.
Calls to EFJ were not returned up to press time, but that company is owed $65 million, according to Garbutt.
It is understood that the sticking point at EFJ has more to do with changes in the board rather than any disagreement.
The AML/Pan-Jam consortium is pumping at least $550 million into this deal - $350 million to acquire the 90 per cent equity stake, and $200 million to pay off the senior debt to National Commercial Bank.
Lawyers for the consortium said "a standstill agreement" was in place with NCB, meaning that the bank has agreed to take no action to call the debt owed by WWP or seize its assets until the negotiations have been finalised with all creditors.
There was no confirmation on this from NCB, which said it does not comment on business with its clients. The NCB loan was made back in early 2005 to help finance WWP's new plant, modernise its facilities, and streamline its operations.
Classes of creditors
Two of the four partially secured creditors - ScotiaDBG Merchant Bank Limited and Development Bank of Jamaica, who are owed about $50 million - will be paid 40 cents on the dollar or some $20 million.
Though Ex-Im is also a partially secured creditor, its offer was 10 cents less, because the agency only has a lien on equipment while ScotiaDBG and DBJ both hold mortgages over WWP property, Garbutt said.
A third class of 'general creditors' will get 25 cents on the dollar, or $250 million of the $1 billion owed to them.
"An agreement was reached where 100 per cent of the unsecured creditors voted for 25 cents to be paid on the dollar and hold a preference share where 50 per cent of the profit would be shared relative to the debt over a ten year period," said Garbutt.
The agreement, however, says the profit-share arrangement kicks in after the company had made its first US$2 million in net profit.
Partially secured creditors have also been offered the same 10-year deal to which Ex-Im objects.
According to the scheme of arrangement or rescue document filed by the consortium in the Supreme Court, general creditors totalled approximately 317, to which a sum of over $107 million is owed. Those creditors accepted the offer April 15, and the entire deal is set to be finalised in less than two weeks.
"On May 1, we intend to open or even have some limited production started," said Garbutt. "Farmers are eager to get going and get back into business and that is what we need to see happen."
Working capital infusion
Left: Woodrow Mitchell, managing director of Walkerswood, owns 17 per cent of the group's operation. Right: Raymond Chang is Walkerswood's single largest shareholder with 33.7 per cent.
Garbutt earlier in January had said the investment by the consortium would go as high as US$8 million - the equivalent of some J$710 million at current exchange rates - half of which would be used to pay down debt.
The planned $350 million of cash infusion into WWP by AML/Pan Jam will be used as "badly needed" working capital and future capital expenditure.
Pan Jam, a listed company, has 25 per cent equity in the consortium and is expecting to play an active role in the management of the Walkerswood group. The group comprises seven entities which fall under the holding company WWP.
The Supreme Court must sign off on the scheme before AML/Pan Jam can begin operations at Walkerswood, shuttered sometime in 2008. At shutdown, the company had negative working capital of $46 million.
Garbutt, along with his partner in AML, Christopher Bowman, will assume management control of Walkerswood Group and begin reorganisation of the company once the court gives the green light.
The consortium will assume responsibility for clearing statutory debts, as well as $30 million of pension scheme payouts.
If the deal goes through, the Walkerswood Group would be merged with Associated Manufacturers.
The name of the merged entity was not disclosed but Garbutt has said it will retain the name Walkerswood, whose products include the Busha Browne and Jamaica Joe brands of condiments.
sabrina.gordon@gleanerjm.com