Berbice Bridge Company Inc. – 2011 profit increase – continued

The serious limitations and late presentation of the audited financial statements of the Berbice Bridge Company Company Inc. and its annual returns have been pointed out before. The response of the directors and the auditors has been silence. Yet as long as the issues continue, and despite the hubris and arrogance of the directors, these shortcomings must be exposed and pursued. Once again, the disdainful conduct of the company was on full display this past week when I wrote Mr. Keith Evelyn the company’s Chairman a letter, copied to the Company Secretary Mr. Steven Rambajan, requesting access to certain records of the company. That access is a right of any person under section 194 of the Companies Act. It took the company a full week to respond with a masterpiece of which no paraphrasing can do justice. I therefore quote the text of the company secretary’s response dated September 25 but faxed to me on September 27.

BBCI acknowledges receipt of your letter dated September 23 addressed to the Chairman, and the request contained therein.

The company has noted that your letter did not allow the privilege of a proper reason or rationale behind this unusual request.

Accordingly, I am writing to inform you that the Board would be happy to consider your request objectively should you be able to give proper justification for your request, stating what meaningful objective can be achieved by this exercise; especially given that BBCI has in place internal controls, external auditors, and is subject to the Berbice Bridge Act No. 3 of 2005.

Upon receipt of a satisfactory response, the request would be put to the Board for consideration.”

Yours sincerely,

[Signed] Secretary/Accountant

The information to which I sought access were:

(1) the register of shareholders. We recall that the former Company Secretary Mr. Winston Brassington had failed to disclose the required information in the company’s annual return;

(2) the register of debenture holders. Certain debts of the company are subject to a first debenture over the fixed and floating assets of the company; and

(3) conversion privileges or rights to the shares in the company.

Surprised, I immediately responded to the letter pointing out that there is no requirement for me to give any reason and restating my request.

Directors’ failures
While my request takes its course, let us now return to the audited financial statements annexed to the annual return filed with the Registrar of Companies. Compounding the serious limitations of the audited financial statements were breaches in respect of the due date for the holding of the company’s annual general meeting, the filing of the annual return and the inclusion of a directors’ report therewith. It is unfortunate that a Board which includes a former Chancellor of the Judiciary could be so unmindful of or derelict in its statutory obligations and yet be arrogant about it.

I believe that the omission of the directors’ report is more than an oversight. Such a report was filed for 2008 and it has to be assumed that the directors were aware of their statutory duty to file such a report annually. And in any case ignorance could hardly be used as an excuse. By this omission the directors probably delude themselves that they are spared the obligation to account for their stewardship.

The current directors of the company are:

1. Keith Evelyn, Chairman
2. Ravi Ramcharitar
3. Avalon Jagnandan
4. Gillian Burton (Ms.)
5. Egbert Carter
6. Paul Cheong
7. Cecil Kennard
8. Maurice Solomon

Ms. Gita Singh-Knight, Chairperson of the company from its inception, is no longer on the Board. It is not clear whether she opted not to be reappointed or was removed and whether for her single place the Ramroop companies New GPC and Queen’s Atlantic Inc. (QAII) were able to have two of their managers – Ravi Ramcharitar and Avalon Jagnandan – placed on the Board. Readers will recall that last week I reported that QAII had acquired in 2011 the remaining 80 million shares held by CLICO in the Bridge Company. Also replaced is Paul E. Fredericks Attorney-at-Law and the incoming director is Ms. Gillian Burton who is attached to the Office of the President.

For its 70.3% of the total issued shares in the company, the Government is entitled to have only one director while the Ramroop group has two directors for its 12% shareholding and the Hand-in-Hand group for its 3% holding gets the chairmanship of the board. By contrast, the NIS which owns 20% of the company’s equity capital or 6% of its total capital has one representative, Maurice Solomon whose role in Clico’s liquidation has seemed not to have served the best interest of the NIS, Clico’s largest creditor.

The $80 million in equity shares is not the only sums invested in the company by the NIS. The Scheme’s 2011 financial statements report an unsecured investment of $1,560 million in BBCI, presumably in bonds, and stated as attracting interest at rates varying between 5.25% and 11%. The problem which Mr. Solomon may be able to explain is that the accounts of BBCI has no unsecured investment in the name of the NIS, or any other investment paying interest at anything like 5.25% per annum.

Another large investor in the company is the New Building Society ($1,870 million) but it too has no representation on the Board. This asymmetry seems typical of Brassington’s concept of public-private sector partnership.

A significant change too is the replacement of Winston Brassington as secretary of the Company. Mr. Brassington not only sat at the head table as the representative of NICIL holding 70.3% of the issued shares of the company but also the Special Share, sometimes referred to as a golden share.

Brassington gave away half a billion in dividends
If Mr. Brassington’s attitude to and practice of governance issues was poor – indeed as company secretary he was central to the improper and misleading filings under the law – his disregard for the public revenues of the country and the cavalier manner in which he went about it should not go without strong sanction. The 70.3% shareholding in the company was held by a company called Aroaima Mining Company Limited which was controlled by NICIL. (In fact, on March 31, 2011 all of Aroaima’s assets and liabilities were vested with NICIL). As director of Aroaima, Brassington decided to waive $104.5 million in dividends payable on the shareholding annually.

It is clearly overdue that Brassington should be summoned before the relevant authorities to answer for his flagrant disregard of the law. And BBCI must be made to pay the accumulated dividend of more than half a billion dollars payable to the Government since neither Brassington, nor indeed no one else, has any authority to waive those dividends. It is probably worth restating that BBCI’s Articles of Amendment not only provides for the carrying forward of unpaid dividends, but that these be paid at “an increased rate of 1% per annum over the 11% previously due….”

It is probably of more than of surface significance that as secretary of BBCI Brassington submitted to the Registrar of Companies incomplete if not false annual returns, concealing the required information on the preference shares. In this, he was helped by audited financial statements which merely referred to an “investor” and did not include the amount of the waiver or show it as a related party transaction.

And risks a further $1,030 million in principal
The financing structure for the Bridge Company is one of Brassington’s works of art. Even before the Bridge was built, many persons had challenged his projections as being far too optimistic. In fact, the New Building Society took only a small investment, rejecting Brassington’s strong overtures. It took no more than a few short years before it became reality that notwithstanding the most generous menu of tax concessions granted to any entity before Atlantic Hotel Inc., and the several hundreds of millions spent by the government to make the project work, the financial structure of the Bridge Company was weak. Had the $500 million plus dividends not been waived, the company would have been unable to meet its obligations and would be in a serious overdraft position.

My fear is that not only will every effort be made by Brassington to have the country continue to give up its entitlement to preference dividends of $104 million annually but that the Government may lose most if not all of the $950 million invested in preference shares. Similarly the NIS will lose out on its $80 million equity and possibly some portion of the approximately $1,500 million in its loan investment in the company. Interestingly this type of financial arrangement is not dissimilar from the model Brassington proposes for the Atlantic Hotel Inc., the multi-billion dollar Government Company of which he is the sole director.

Brassington’s creative financial exploits have been on full display during the parliamentary recess. When the Assembly resumes, it is incumbent on the parliamentary opposition to act to protect the public revenues of the country. If it allows Brassington to continue this lawlessness then we as a country must stop the pretence that we have financial laws and cease speaking ever again of accountability.

Liquidity dangers
With its high borrowings, liquidity dangers for the Bridge Company are never too far from the surface. This concern is not helped by the improperly prepared financial statements such as the word “maturity” in relation to the repayment of more than $5,575 million in corporate bonds. The 2010 financial statements disclose that Tranche 1 of the Corporate Bonds amounting to $3,050 million will be maturing in 2013 while Corporate bonds Tranche 2 for $2,525 million will be maturing on June 30, 2017.

But then the 2011 financial statements tell something completely different. It says that Tranche 1 will “mature on June 30, 2014 but repayment of principal will be in ten semi-annual instalments commencing in 2014 and concluding in 2018”. And in respect of Tranche 2, it states that those bonds will mature in 2018 and that repayment of principal will be in eight semi-annual equal instalments commencing in 2018 and concluding in 2021.

If we assume that two instalments of Tranche 1 becomes payable in 2014, the company will have to find some $610 million to repay Tranche 1 and another $100 million or so to repay other loans which will become repayable. If the company is unable to meet those obligations, it would find itself facing what is called ‘cash-flow’ insolvency.

Despite all the concessions, waivers and a monopoly that excludes pedestrians and cyclists crossing the Bridge, and despite the highest known toll charges in the world, the company continues to face financial challenges. The Bridge has spectacularly failed to deliver the promises made by Jagdeo and Brassington about reasonable tolls, profitability and the payment of preference dividends annually. Now the waiver of those dividends is required to lend an appearance of viability.

The annual $104.5 million waiver will probably not be allowed to continue, putting the company under even greater pressure and threat. I therefore remain convinced that the best option for this company and the users of the Bridge would be for the Government to take it over.

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