Michael Lee Chin, chairman of AIC Limited, will have to bowl a masterful game when he faces bond holders again this morning and ask for their patience. Lee Chin will seek another five months of grace to repay the bonds. - File

Michael Lee Chin has failed to come up with the US$155 million (J$13.8 billion) that AIC Barbados, the holding company for his Caribbean investments, owes bond holders.

About US$108 million of the debt is owed to Jamaican investors, of which US$47 million is due this year, an internal document acquired by the Financial Gleaner reveals.

Lee Chin was already granted one extension to June 11 to repay the bonds, a date he now says he also cannot keep.

Wait another five months

He will be asking investors to wait another five months to November to get paid, having already missed the initial maturity date for US$40 million of the debt in March this year.

The Jamaican billionaire, who made his fortune in Canada, will meet anxious bond holders in Kingston this morning to explain the delay in selling his stake in the Pan Caribbean fibre optic cable business, Columbus Communications, the deal he is banking on to pay off the debt.

His position is even more vulnerable, given AIC Barbados' tenuous finances.

In the quarter to December 2008, the company suffered net losses of US$6.5 million on the back of a 303 per cent, or US$5.6 million, decline in operating cash flow and foreign exchange losses of US$8.5 million, despite pulling in US$7.7 million in dividend income from NCB, its main source of income.

Forced sale

If Lee Chin fails to stave off any move by worried investors to call a default, at stake for Lee Chin is the forced sale of his 20 per cent of Columbus, the National Commercial Bank (NCB) towers in New Kingston and the 877 million shares in the bank originally used to secure the debt.

He owns or controls as much as 1.68 billion of the 2.46 billion NCB shares, or 68 per cent.

In the face of a US$60 million shortfall in the required collateral level in March, Lee Chin pledged his stake in Columbus as well as the prime real estate.

At the time, AIC officials were confident of raising the cash from the sale of some of its Caribbean assets to meet the obligation within the three months the investor agreed to.

"Strategies to monetise a sufficient amount of these assets to fully pay off the notes are well under way," Robert Almeida, executive director of AIC Global Holdings and the man in charge of Lee Chin's Caribbean operations told sister publication Wednesday Business at the time.

This week, AIC Barbados (AICB) suggested that it had offers for the Columbus shares from several prospective buyers.

The company is said to be in possession of a letter from Royal Bank of Canada stating that several bids of amounts close to the value Lee Chin has put on the Columbus shares have been received from interested parties.

On Thursday Lee Chin's Carib-bean outfit confirmed the pending Columbus share sale, which it said was taking longer than expected to close the deal resulting in the need to ask AICB's creditors to hold off for a while longer.

AICB now expects to complete the sale of Columbus shares by September.

"The notes are significantly over-collateralised by our ownership of NCB as well as the anticipated proceeds of disposition related to a Columbus transaction." Almeida told the Financial Gleaner.

"We have consistently indicated that there is substantial asset coverage and the issue is one of time to liquidate assets so as to facilitate debt repayment."

A recent financial assessment done by NCB Capital Markets Limited reveals that at February this year more than 1.3 billion shares of AIC Barbados' 60 per cent stake in NCB had been pledged for various arrangements to finance acquisitions and for working capital, with 156.58 million shares remaining unrestricted.

"For a number of reasons, not the least of which is the substantial number of parties interested in acquiring some of the assets, the divestiture process is taking longer than originally anticipated," the company AIC said in a statement issued through its publicist in Jamaica Wednesday.

Economic conditions blamed

Lee Chin blames global economic conditions for his failure to raise the cash.

"The global credit crisis and associated recession have created significant liquidity pressures in the local and regional capital markets prompting AIC (Barbados) Limited to work with its creditors to restructure the maturities of notes," said the statement.

"Based on the experience of the last three months and the increased visibility into the process, AICB is now in discussions with its creditors in relation to extending repayment to November 2009," AICB said.

But even as AICB touted the fact that the bonds were backed by the strength of the very profitable NCB, both its and AICB statements have sought to distance NCB and downplay any exposure.

Lee Chin's request for an extension received easy passage last time round, but there are clear indications now that the holders of his company's debt are getting impatient with the protracted delay and will today come down on the side of what is perceived to be the quickest route to raise the cash necessary to recover their investment.

Instructions

"I had made plans based on assurances I would have received my money in March," said one investor, who declined to be identified.

The AICB bonds were first issued six years ago.

NCB Capital has recommended extension of the maturity period to November 30.

Today, bondholders are expected to issue their instructions to trustee, Pan Caribbean Financial Services, whether to agree to the delayed payment or to effect a default and move to liquidate the bond collateral.

Pan Caribbean said it would act according to whatever instructions are given by the investors.

"We would have preferred if everything has been concluded on time, but we understand that the transaction is a complicated one," Pan Caribbean said in response to Financial Gleaner queries.

Asked about its valuation of AICB collateral, Pan Caribbean said the collateral value surpassed the minimum required under the trust deed.

huntley.medley@gleanerjm.com

Corporate headquarters of National Commercial Bank. The bank, which is one of Michael Lee Chin's most prized assets, is said to have no exposure to the delayed bond payment though some of its shares were used to back the bond.