FINSAC paper trail
TOTAL amount of Financial Sector Adjustment Company (FINSAC)
securities outstanding stood at almost $93 billion at the end of May this
year, according to official Government figures circulated in New York this
The news comes as FINSAC last Thursday said it had agreed to pay Life of
Jamaica's investment funds $658 million primarily for two New Kingston
prime office blocks, the Citizens Bank headquarters building and the
FINSAC chief executive Patrick Hylton said it had purchased the properties
and about $6.3 million worth of Citizens Bank shares from the segregated
fund and pension funds run by Life of Jamaica to speed up the process of
aiding LOJ's recovery. He said the company had been supporting the funds,
which meant liquidity had been tied up by the company.
LOJ senior vice-president for investment, Ian Neita, said the deal would
help enable the funds to generate their own liquidity.
FINSAC intends to issue LOJ more promissory notes to cover the bulk of the
transaction, which the institution hopes to sell to provide cash if
required for the funds.
News of the deal comes as more details about FINSAC's operations were
revealed this week overseas. The details are contained in a preliminary
offering memorandum for the Government's proposed bond issue, obtained by
the Financial Gleaner and circulated this week in New York.
The document says that FINSAC has outstanding paper of $92.8 billion. Mr.
Hylton said yesterday that about $2 billion worth of promissory notes had
recently been cashed in, which left the figure outstanding closer to $91
As outlined by Finance Minister Dr. Omar Davies during his Budget
presentation, he expects FINSAC disposals to raise $8.7 billion in the
year to the end of April 1999.
"In addition, FINSAC expects to collect a minimum of 25 per cent of
the $22 billion portfolio of non-performing loans, including expected
collection of $1.2 billion during FY 1999/2000. As at March 31, 1999,
FINSAC has collected $1.6 billion of non-performing loans and has received
$1.8 billion in cash from the sale of assets. In addition to the amounts
collected more than $3.8 billion of loans have been restructured.'
The memorandum adds that the Government believes it has identified and
taken appropriate action to tackle the sector's problems but "there
can be no assurance, however, that substantial additional financial
assistance or other Government action may not be required in the future as
developments in the financial sector continue to evolve.
The Government has estimated that the bail-out of the financial sector has
resulted in the protection of 1.5 million depositors with a value of $68.7
billion and 569,000 individual insurance policies with a face value of
The Government set aside $7.9 billion to help fund the liquidity
requirements of the institutions in the recent Budget.
When FINSAC published its accounts for the 15 months to March 31, 1999 it
cut the value of its investment and assets in the sector by $45 billion to
just $20 billion. As well as issuing paper to institutions for support,
FINSAC has also paid interest to some of the ailing companies in more
December 31, 1999
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