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The Gleaner - May 2, 2001

 

FINSAC bad debt extension unlikely

THE FINANCIAL Sector Adjustment Company (FINSAC) said it has received expressions of interest from more than 20 local and international companies willing to buy its $52 billion bad debt portfolio, but it has not yet put together formal offers for its sale.

That was partially because of the April 30 deadline offered by Finance and Planning Minister Dr. Omar Davies for debtors to the state-owned agency to finalise arrangements to repay their loans or face those who buy the bad debt portfolio at discounted prices.

Attorney-at-law and corporate operations executive at FINSAC, Patrick McDonald, said that before the sale of the bad debts, it would be necessary for the agency to make adjustments to its database to reflect the positions of those who have made arrangements to settle their outstanding balances.

Mr. McDonald said that while a number of debtors have used the April 30 deadline to make arrangements to settle their debts, "as far as I know no extension is being contemplated at this time."

According to the FINSAC executive, "I can't see any good reason why there would be an extension. The debts were taken over from 1998 and people had from that time to come in and make arrangements to settle. The cry for an extension has no logical basis."

He was responding to suggestions that Percival LaTouche, president of the newly-formed Debtors' Resolution Action Committee (DRAC) was lobbying for an extension of the April 30 deadline on the ground that it was very difficult for the debtors to access funds in the present financial environment.

Mr. McDonald said the aim of the purchasers of the bad debt portfolio was recovery and requests for an extension could be made with them when the debts were sold.

FINSAC, which centralised the collections of non-performing loans by various banks into a single unit within the organisation in 1999, collected $4.8 billion up to February, this year, with $1.4 billion collected during the last financial year.

In its 2000 annual report, FINSAC's managing director Patrick Hylton said that in addition to the collections, many of the loans had been restructured through the process of negotiation, working with FINSAC's oversight committee and through initiatives with the National Investment Bank of Jamaica (NIBJ) and the National Development Bank (NDB).

In requesting an extension of the deadline for debtors to settle with FINSAC, Mr. LaTouche, in a letter to the Finance Minister which was copied to Prime Minister P.J. Patterson and obtained by Wednesday Business, said that "in the long run, the Government would gain advantages far outweighing the detriments if steps are taken to refinance the business proprietors so that they can re-tool, re-equip and re-start their businesses."

In the letter, Mr. LaTouche said the debtors, especially those being "dehumanised and traumatised" by FINSAC, have resolved "not to stand idly by and watch their life long accumulations being devalued and sold to foreigners and friends in high places."

Mr. LaTouche said that in the meantime, they would asking the Supreme Court to issue an injunction barring FINSAC from taking further action against the debtors, including selling the bad debt portfolio, until a class action they will also be filing, has been heard and determined by the Court.

He said the newly-formed Committee was already representing more than 100 large debtors to FINSAC, but they were hoping to get the support of at least 10,000 of the 18,000 delinquents in the coming months.

In its annual report for the year 2000 released recently, FINSAC's legal department said that on instructions from the non-performing loans unit, it issued demand letters with respect to 460 accounts, and served 170 statutory notices on mortgages.

In instances where formal demand has expired, no response has been received from the debtors and there was no security or inadequate security for the debt, the department has taken legal action. By the end of the fiscal year 1999/2000, the report said, FINSAC had filed 12 suits to recover just over US$2.7 million and J$130 million.

According to the report, during the course of the year the Supreme Court granted 51 judgements in suits instituted before the loans were transferred to FINSAC.

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