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The Gleaner - February 21, 2001

 

Union Bank sale delayed

ACCORDING TO sources at the Ministry of Finance and Planning, the much vaunted sale of Union Bank to the Royal Bank of Trinidad and Tobago (RBTT) has been put back to early March of this year.

The sale of the bank was supposed to be finalised at the end of July of last year. That date was pushed back to the end of August while Trinidad's second largest bank, RBTT, planned to finance the deal by a debt issue of around US$100 million, with some US$60 to US$70 million for use on the purchase of the Jamaican bank. A deadline of December last year was set, but that went by without the Government able to divest itself of the amalgamated banking entity.

Speaking at the Mayberry Investor's Workshop at the Courtleigh Hotel, New Kingston last month, the Finance Minister Dr. Omar Davies said: "The Financial Sector Adjustment Company (FINSAC) is now at the point where there are only six distinct tasks to undertake. These relate to the completion of the sale of Union Bank, bringing NCB to the point of sale, dealing with the divestment of Life of Jamaica (LoJ), addressing the non-performing loans on its books and the sale of the hotels where we are literally down to just the divestment of Ciboney.

Dr. Davies pointed out that the sale of Union Bank to RBTT was due to be completed in December, but he was looking to do so later in January of this year with the lawyers now going through the finer points of the sale.

The complexity of Union Bank appears to be one of the factors hindering the completion of the sale. Union Bank consists of 24 branches islandwide, the remnants of 4 commercial banks, 4 building societies, 3 merchant banks, micro financing and post office issues all to unravel before the bank becomes an entity fit for sale.

FINSAC's corporate operations executive Patrick McDonald speaking to Wednesday Business said: "We had a useful meeting with the Minister of Finance last week and agreed that there are a number of operational issues yet to be resolved. As far as FINSAC paper on Union Bank's books is concerned, a decision has been taken to convert these to Local Registered Stock (LRS) with a basket of various maturity dates being agreed upon. There is a very realistic chance that the sale will be completed early next month."

Mr. McDonald drew attention to the fact that the accounting firm of Deloitte and Touche are redrafting the sale agreement and that a consensus of the number of stake holders at the bank had to be sought. He pointed out that RBTT, the Bank of Jamaica and the Minister of Finance had yet to sign off on the deal and that all parties had to do so before a deal could effectively be announced.

The Government may well be anxious to complete the sale of Union Bank before the Minister of Finance makes his budget announcements in April and will be viewing the sale with one eye to balancing the budget.

RBTT has made it known that it is looking to establishing a significant presence in the English speaking Caribbean and sees Union Bank's depositor base as a suitable entry into the largest English speaking market.

The Government is looking to RBTT to pay a slight premium above the $3 billion of equity in the bank and is expected to issue as much as $20 billion of long term, local registered stock to replace the bulk of FINSAC paper on Union's books.

Results for the year to the end of December 1999 indicated a $32 billion asset base, some $22 billion or 68 per cent in FINSAC paper. Its liabilities stood at $29 billion of which, $12 billion were in individual deposits and another $9 billion in Government and business accounts.

Audited results for the year ended December 1999 show the bank making a loss of $1 billion.

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