THE FINANCIAL Sector Adjustment Company (FINSAC) will own 76 per cent of National Commercial Bank Jamaica within the next six months, if a plan announced yesterday is accepted by shareholders and the court.
As part of the plan the bank's parent company will become a shell for largely real estate assets owned by the Group and be 100 per cent owned by FINSAC. The Group will be delisted from the Jamaica Stock Exchange (JSE). There will be a new listing of National Commercial Bank Jamaica, with all core financial services operations included, which will be 76 per cent owned by FINSAC.
Details of the plan will be sent to shareholders over the next couple of days, indicating that an informal briefing on the proposals will be held on September 25.
NCB Group chairman Oliver Clarke said the move marked the end of phase one of the rehabilitation of operations and was essential if the bank was to be divested by FINSAC and shareholders were to get a dividend soon. He said the move would hopefully lead to the speedy disposal of all or part of FINSAC's stake but there was not as yet a bidder identified.
Managing director Dunbar McFarlane said: "Let me emphasise two important points. First, the 76 per cent ownership by FINSAC is intended to be a temporary step in the process of the planned sale of its interest in the bank. Second, this does not, I repeat does not, represent any further assistance to the bank or the group by FINSAC."
Under the proposal, all shareholders other than FINSAC (public shareholders) in the Group, will receive one share in National Commercial Bank Jamaica for each Group share held. FINSAC will redeem or convert its entire preference shareholding of $5.3 billion in the bank into ordinary shares.
"On completion of the reorganisation, FINSAC will own 76 per cent of the bank, of which it is intended to allocate one per cent minus one share to employees of the bank and its subsidiaries, and public shareholders will own 24 per cent. Shares in the bank will be issued to public shareholders in exchange for shares now held in the Group."
He added: "We are strongly in support of the proposal and speaking for myself as managing director and on behalf of all managers of NCB, I wish to say that we will encourage our staff at all levels and indeed all shareholders to support the Scheme."
Douglas Peebles, the general manager of finance, planning & risk management said an informal briefing of shareholders would take place on Monday, September 25 at which point investors would be able to discuss the letters being sent out on the proposal with NCB executives.
The plan will see FINSAC and the Group agree to a Scheme of Arrangement under Section 192 of the Companies Act. The clause is the same one, Mechala Group Jamaica recently used to financially reorganise its operations.
The Scheme is a complex legal procedure that needs court approval to take affect. NCB will prepare details of the plans, which are filed in court. The court will then access the fairness of the proposals and grant permission for a meeting of shareholders, which will vote on the plan.
A vote is then to be taken at which time 75 per cent of shares voted and a majority of shareholders attending and voting must support the new arrangements. Once the court is satisfied with the plan and approval by a majority of shareholders voting, the plan will be put into place. Mr. Peebles said this should take about four to six months.
Mr. McFarlane said: "Our Board, recognising that the rehabilitation of the bank is well underway, views this proposal as a necessary step in returning a strengthened bank to private ownership. While FINSAC's shareholding in the bank will increase to 76 per cent, the terms of conversion of the preference shares into ordinary shares are such that the relative economic interests of both public shareholders and FINSAC are preserved."
If the plan goes through, shareholders could immediately reap some reward, with the Board of the bank, supported by FINSAC agreeing to "pay a dividend in the next financial year subject to the maintenance of appropriate regulatory capital".
"It should be noted that a dividend payment to current ordinary shareholders of NCB Group would otherwise be hardly likely in the short run, given the preference share obligations," Mr. McFarlane said.
The plan still requires the approval of the Bank of Jamaica as the regulatory authority and the JSE will have to accept the listing of the newly reorganised bank.
In 1998 NCB struck a deal with FINSAC that saw a package of assistance through various investments.
Under that agreement FINSAC acquired non-performing loans and injected equity by way of preference shares in both the bank and the group. FINSAC also acquired 40 per cent of the bank's shares. FINSAC in a separate and independent transaction acquired Jamaica Mutual Life Assurance Society major stake in NCB Group, approximately 45 per cent, which gave the restructuring company effective control of 67 per cent of the bank.
This latest move gives FINSAC 76 per cent of the Bank but sees its $5.3 billion of preference shares, which have first rights on profits made by the group, swapped for ordinary shares.
In the nine months to June 30 net profit was $418 million with the banking subsidiary recording a net profit of $305 million.
NCB added that Government is expected to turn $42.5 billion of FINSAC paper into local registered stock and start paying interest in cash as of April 1. This follows a similar commitment by Finance Minister Dr. Omar Davies to the International Monetary Fund recently.
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