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The Broad Street Journal The Broad Street Journal, February 5, 2011 • Page 1

FEBRUARY 5, 2011

Vol. MMXI No.1

Barbados’ Independent Business Voice

BHL had approached NIS about investing in new brewery The National Insurance Board, which has shown its willingness to invest in commercial buildings in recent times, was formally approached by Banks Holdings Ltd. when it was looking for a way to finance its new brewery at Newton, Ch. Ch. According to a source, who spoke on condition of anonymity because he was not authorised to speak on behalf of the board, the National Insurance Scheme was very keen to invest in the

project. The original letter from BHL was put on the normal procedural track - forwarded to the board’s investment unit, which would prepare and assessment to be forwarded to the NIB’s investment committee, which would then forward the full report to the board with its recommendations. But BHL, said the source, seemed to lose interest in the NIS’s possible investment, causing incoming Chairman Tony Marshall to ask what had hap-

pened to the proposal as it never came to the board. “He was told it was no longer being pursued by BHL,” said the source. BHL’s courtship of the NIS as an investment partner had come to a sudden and unexplained stop, and it later told shareholders it had struck a deal with Latin Captial for the funds (See page 2). The NIS has purchased the two multi-storey buildings currently being constructed at Warrens, St Michael. •

Real Estate

Hutton: Warrens leads island in A-Class office market Warrens, one of the island’s fastest growing commercial areas, will soon be the leading location by far for A-Class office accommodation, according to Terra Caribbean. Writing in the latest edition of The Red Book, the real estate brokerage firm’s annual catalogue and overview of the market, Terra Director of Brokerage Hayden Hutton notes that while the AClass market here is “modest” in size and easily outstripped in terms of square footage by “significantly larger” B- and C-Class segments, it has proven to be “resilient”, with a “natural vacancy rate” only in the three to five percent range. He describes the B- and CClass segments as “dated office buildings and a number of smaller converted residential properties.” Mr. Hutton notes that in this top class of office accommodation, “traditional supply has tracked demand, with very little speculative construction and most buildings fully subscribed at completion.” They are usually occupied by Continued on page 3

With almost 120,000 sq. ft. of office space, the Baobab Tower at Warrens will be Barbados’ largest A-Class office building, according to Terra Caribbean’s Red Book. The centuries-old Baobab tree, one of only a few found on the island, stands in front of it, next to the highway.

Telecommunications

LIME names Sherwin Greenidge to head new Customer Experience department Managing the customers’ experience is the job of every single employee at LIME. However, one man and his team of service ambassadors is charged with ensuring that the company lives up to its assurances and achieves customer satisfaction at every point of contact. That person is Sherwin Greenidge, Head of Department Customer Experience. Mr. Greenidge has over 30 years of experience in the telecommunications industry and can draw on his knowledge of the business in areas like IT, corporate sales, service delivery, and customer service. He holds a BSc. in Computer Science from the University of the West Indies and certification in Sales, General and Supervisory Management from BIMAP. He has also served as President, Zone and Region Chairman of the Lions Clubs International. Commenting on some of the duties and

responsibilities of the new Customer Experience head of department, LIME’s Managing Director Alex McDonald said, “The major focus of the role is to improve the service levels at all customer ‘touch points’ within the business; to create a more knowledgeable/informed customer on the company’s product and service offerings; and to be the ultimate point of resolution for complaints and queries.” Mr. Greenidge has already begun to make some positive changes in customer education through the well-received BlackBerry information sessions and with the recent “Did You Know?” press campaign. He said the aim of the Customer Experience team will be “to drive up that level of customer satisfaction, and that impact will be measured in real terms by our customer retention, loyalty and acquisitions.” •

LIME’s Sherwin Greenidge

The new plant for Banks Breweries under construction at Newton.

Insurance & Financial Services

IN TRIBUTE TO CECIL

Bust of Cecil de Caires (1917-2003), unveiled in the lobby of the building at Wildey renamed in his memory.

Sagicor renames head office after LOB founder

He built Life of Barbados “from scratch” into the dominant life insurance company in the island, only to see it fall into the hands of its rival, the then Barbados Mutual, in a takeover bid which could only politely be described as hostile. Cecil de Caires also watched as the symbol of LOB’s emergence as an insurance giant, its brand new headquarters building at Wildey, became the corporate headquarters for the merged company, soon after to be renamed Sagicor Financial Corporation. But time heals all wounds, and last week the Sagicor Fi-

nancial Corporation publicly acknowledged the immense contribution made by the insurance pioneer to his chosen industry. Sagicor President Dodridge Miller told The Broad Street Journal at the event that despite the intensity of the battle for control of Life of Barbados, Cecil de Caires always enjoyed the respect and affection of his colleagues in the industry, and that, at least at the personal level, things were never as bad as they may have been portrayed. He gave great credit to Mr. de Caires for the fact that this was so. In a nostalgic ceremony Continued on page 4


The Broad Street Journal, February 5, 2011 • Page 2

Shareholders protest actions of BHL board In a letter to shareholders dated June 30, 2010, Banks Holdings Ltd. announced that it was issuing new shares to Latin Capital Fund I, LP via its subsidiary SLU Beverages Ltd. The company said that by the date of the circular (June 30) the board had “received written authority” to convert US$26.5 million shares of the total convertible debt of US$28 million, into 13.25 million shares in BHL. In a follow-up letter, dated December 13, 2010, which, like the first, was signed by Chairman Sir Allan Fields and CEO Richard Cozier, the company stated that “An integral part of financing models such as this is the need to protect all shareholders from future dilutions of their holdings and such a clause is included in our agreement.” As a result, the company said, an extraordinary general meeting was being “convened specifically” because “we have been advised that shareholder consent for restrictions on future utilisation of shares as a financing option should be obtained.” The meeting was held last Monday at 10 a.m. at the Lloyd Sandiford Centre, and turned out to be a contentious one, with protests about BHL’s actions coming from many shareholders. A poll vote was conducted, with the vast majority of the shares voted approving the resolution, which read as follows: “Until such time as Latin Capital Fund or any affiliate thereof shall cease to hold shares and/or notes convertible into shares in Banks Holdings Limited there shall be no change made to the number of issued shares in Banks Holdings Limited except with the written consent of Latin Capital Fund.” The Broad Street Journal spoke to some of the minority shareholders who attended the meeting and opposed the resolution to learn how they viewed the issues involved.

Dr. Frank Alleyne:

“A failure of corporate governance” “It was a critical meeting from the point of view of a missed opportunity for elevating the standard of corporate governance,” he said. “I told them they are setting a double standard, and Sir Allan understood what I was saying. You go and make a decision to dilute the shareholding and then you call upon the minority shareholders to agree with you that the Latin Capital group can now demand of us that no decision to further dilute the shareholding can be made even if it is in the best interest of the company.” He said he also asked the chairman to give him permission “to examine the particulars which they submitted to the Securities Exchange Commission.” He added: “I have very serious misgivings about what has happened so far,” and he said “I used to be a member of that commission. I know Sir Neville Nicholls, and I don’t see how at all the commission could have done that.” He said that Latin Capital, while common shareholders, now had special rights because while they are involved BHL could not issue any further shares without their permission. How can you have different rights for the same class of shareholders?” Dr. Alleyne said that board of directors would have sat down with the Latin Capital group and agreed those things. So why come now for approval, seven months later? He concluded: “This country cannot achieve any sustained economic and social development if the quality of corporate governance continues to be what it is, because small shareholders will not buy into a company if they have no protection from the boards. Tell me why on earth you would call that meeting on a working day? There are workers who have shares across Banks Holdings I didn’t see one of them there. Even if one was there, they dare not get up and criticise that thing and vote against it.” Finally he said, “If this goes to court in a class action lawsuit, I will be a party to it.

Pearson Leacock:

“Minority shareholders have rights, too” An attorney-at-law who has been invested in BHL for a decade believes that allowing Latin Capital to take up such a large stake in the company puts it in a position where it could fairly easily launch a takeover bid for BHL. “Five percent can’t be a lot to get,” said Pearson Leacock, referring to the Barbados takeover code, which obliges any

The new plant for Banks Breweries (B’dos) Ltd., for which the US$28 million was raised by BHL, has already started construction at Newton, Ch. Ch. shareholder amassing 25% or more of a company to launch an official takeover bid. “What BHL has tried to do is create a second class of shareholding within an ordinary class, and I know that that is not legal,” said Mr. Leacock. In his opinion, the people who have owned shares since the time the company started “probably feel the most cheated. Mr. Leacock said the company should have had a rights issue, under which the existing shareholders would be given the opportunity to buy shares at a discounted price in order to maintain their positions in the company. Under a rights issue, he explained, “You are only given a certain amount that you are eligible to buy. However, if other shareholders do not take up all of the shares they are being offered, you could then go back and take up what’s available. Mr. Leacock said that he did not see why so much emphasis had been placed on the need to bring in the foreign capital. Even if the rights issue didn’t do the trick, he said, the chairman had said last year that the Wildey property was to be sold and had been valued at some Bds$18 million. So any shortfall on the rights issue could have been financed by loans on the local market and repaid from the sale of the brewery property. Mr, Leacock said he wanted the public of Barbados to know what had transpired at BHL “because it was really an underhanded thing that I didn’t expect. It took a lot of people by surprise, because they didn’t believe the company would do something like this.”

DougLAS Skeete:

“They recognised something was wrong” It’s not only the dilution of the shares but BHL has given this lender, Latin Capital, which is now a shareholder, the block of shares with rights attached which have not been extended to the other shareholders, says Doug Skeete, president of the Barbados Association of Corporate Shareholders. “So one of the questions is whether a common class of shares can be given to one set of persons having the right to stop the company from issuing more shares while others with the same shares don’t have the same rights,” he said. “That was one of the issues that came up. He said it was normal to go to shareholders to approve transactions that would cause dilution, noting that where BHL itself admitted that you need consent from shareholders in order that “Restriction on future utilisation of shares as a financing option should be obtained.” Referring to a case now in court, in which Sagicor is being sued by Wibisco over the former’s issue of new shares to the National Insurance Board, Mr. Skeete said its outcome would help to clarify the law on dilution. He noted that the transaction took place in June last year. “Now they come in January to say they need the shareholders’ approval for the very transaction. I raised it (at the meeting). I said, ‘You did this transaction in June and the very next day when you got the money you went and issued the shares. Why would you now be coming in January

asking for approval?’” He suggested it was because “they recognised something was wrong.” Mr. Skeete said former BBC manager Martyn King had raised a point about the group’s employee stock option plan, which he had followed up. He said BHL has 730,000 shares that are to be exercised by staff and queried what would happen if they tried to do so. He restated his point that if employees chose to exercise their stock options, BHL could not stop them despite its agreement with Latin Capital. He said he asked why a rights issue was not pursued in order to raise the funds to pay for the new brewery and was told by Mr. Fields that a previous rights issue by BHL was undersubscribed, with the major shareholders having to buy up the remaining shares anyway. I said they were again presuming people would not respond, but would not know until they “put it out there.” He said he would like to see the BHL matter taken to court. “Hearing the comments of the shareholders present at that meeting suggests to me that they were totally unhappy with what has taken place, and if there was a possibility that it could be taken to a court for a determination it should be, and I would support that move.”

Martyn King:

“I was totally opposed to the concept” THE MAN WHO ONCE headed Barbados Bottling Co. Ltd., which was owned by his family before being acquired by Banks Holdings in the late 1980s says that he went to the meeting “because I was totally opposed to the concept” of one shareholder being given veto control over any new share issuance. “Basically what the board was saying was that, after this deal, no shares could be issued” without the approval of Latin Capital, said Martyn King, who is now retired but maintains a small shareholding in BHL. He said he asked the chair to confirm whether BHL still had a policy of issuing shares to employees in lieu of bonus, and the answer was yes. The point he was making, he said, was if such shares were to be issued in the future, “how are they going to do it?” Mr. King said he was informed that they intended effectively to set up a trust fund which would buy any shares that came on the market and use them to satisfy any such options that were exercised. However, he said, it was pointed out by Doug Skeete that there were over 700,000 shares that could be taken up instead of bonuses, and queried how BHL expected to find so many shares to put on the market. After much discussion, Mr King said the thing that “flabbergasted” him was that at the end of the meeting, instead of going for a vote by show of hands, the chairman went straight to a poll, which is based on the shareholding of every person. “So that was the end of that,” said Mr. King. “Any shareholder can call for a poll, and if both of us put up our hands and you have a thousand shares and I have one, you just knocked me out by 999.” •


The Broad Street Journal, February 5, 2011 • Page 3

Warrens leads in A-Class market

Continued from page 1 retail banks and are “spread evenly across the four major submarkets of Warrens, Wildey, Collymore Rock and the South Coast (Highway Seven between the Garrison and Oistins),” writes Mr. Hutton. However, when the two large office buildings currently being built at Warrens - Omni Towers and Baobab Towers - are completed, Warrens will have around 350,000 square feet of A-Class office space out of a total of 860,000 sq. ft. on the island. The two “towers” have been purchased by the National Insurance Scheme, with government-guaranteed 25-year leases, he notes, and will be occupied by various government agencies. Next in line in terms of A-Class space are Collymore Rock with close to 160,000 sq. ft., followed by the South Coast with 146,000 sq. ft. and Wildey with 118,000 sq. ft.. Bridgetown has 78,000 sq. ft. (see accompanying chart). Mr. Hutton says that, at least up to the third quarter of last year, the A-Class office segment had remained stable. “We have seen no evidence of tenants surrendering leases, (and) no demonstrable change in vacancy levels,” so rents had remained stable, in the Bds$48-$55 per sq. ft per annum range “with no signs of softening.” However, service charges have begun to approach the $30 mark at some properties, placing more scrutiny on operational expenses. One “anomaly”  in the overall picture, he says, is the British American Insurance Building at Bishop’s Court Hill, Collymore Rock. Its owner had been put under judicial management, and although full tenanted before completion, the current situation “has impacted on the completed

The Omni Tower, when completed, will be Barbados’ second largest A-Class office building, with almost 90,000 sq. ft. Its sister building, the Baobab Tower, can be seen in the distance. The current largest A-Class building houses the U.S Embassy.

of the building and the willingness of tenants to exchange leases,”  leading to around two-thirds of the space now being available, he notes. Mr. Hutton says that as tenants in the B- and C-Class segments “trade-up” to A-Class buildings, and as the government relocates many of its agencies to the new NIS buildings in Warrens, which together comprise roughly 210,000 sq. ft. of new office space, “we are likely to see some additional vacancy in B- and C-Class properties.” Despite that, he says, the demand for A-Class buildings continues, with two more to be “added to the pipeline” when they begin construction next year. •

Property Name BNB Broad St. Head Office Royal Bank of Canada

Submarket Bridgetown Bridgetown

Brit. American Insurance Building Chelston Park Building A Chelston Park Building B PriceWaterhouseCoopers E. Humphrey Walcott Bldg.

Collymore Collymore Collymore Collymore Collymore

Biovail Building Trident Insurance Financial Centre United Nations House Worthing Office Complex (EY)

South South South South

Baobab Towers (in pipeline) ITC Building Omni Towers (in pipeline) Warrens Tower (CGI) FirstCaribbean Head Office

Warrens Warrens Warrens Warrens Warrens

Sagicor (Cecil F. deCaires Bldg.) US Embassy

Wildey Wildey

Rock Rock Rock Rock Rock

Coast Coast Coast Coast

Area (sq. ft.) SUB-TOTALS

34,050 44,215

78,265

34,374 35,892 30,750 31,200 26,316

158,532

23,275 26,583 56,058 40,400

146,316

119,209 49,149 89,991 50,000 51,827

360,176

32,400 86,000 861,689

(Source: Terra Caribbean’s Red Book)

118,400

Mergers & Acquisitions

Skeete: Emera got a really good deal Emera Inc., the Canadian company which recently made an offer to purchase the remaining 62% of the shares in Light & Power Holdings Ltd. which it did not already own, in a press release issued last Tuesday, Jan. 25, 2011, made the historic announcement: “7,129,269 shares of LPH were deposited in response to the offer and Emera announced today that it will purchase all deposited shares. If the tender and acceptance of all shares is confirmed by the Barbados Stock Exchange as valid, this will increase Emera’s ownership in LPH to 79.74 per cent.”  The sale was completed on Monday, January 31, making Emera the majority shareholder of the parent company of Barbados’ sole electricity utility, Barbados Light & Power Co. Ltd.. The remaining twenty percent of shares not pledged to Emera, according to the new majority shareholder, “are primarily held by 1,700 Barbadian

“Theoretically speaking, they could have gone the next day and declared a dividend of $275 million and pay themselves back the very investment,” said Mr. Skeete. shareholder accounts, including the National Insurance Board of Barbados.” This suggests that Sagicor’s 7.5 percent stake and around 13% of the National Insurance Board’s 23 percent were among the 7.1 million shares deposited in response to the offer. The new ownership profile of LPH will be roughly as follows: Emera Inc., 80 percent; NIB, ten percent; 1,699 local shareholders, ten percent. President of the Barbados Association of Corporate Shareholders, Douglas Skeete, thinks Emera got a bargain. He noted that an independent analysis by KPMG, ordered by LPH, had put the fair

value of the company at $33.70 per share, and Emera had offered $25.70. Yet, he said, “you have the directors there telling the shareholders that is fair, and remain seated as directors. That is a 31% value you are giving away. And if you do a book value based on historical data, do you know it is $36.00 per share?” Mr. Skeete said that a look at the unaudited statements of LPH presented in the second circular would show that the company has over $300 million in undivided retained earnings out of which it can pay dividends, plus cash in hand of over $150 million. The cash is due to the rate increase granted to the company from last year.

“It has almost doubled its profits from 2009,” he said. If Emera had been able to purchase the remaining 62% of the shares it did not already own, it would have cost it around Bds$275 million, he pointed out. “Theoretically speaking, they could have gone the next day and declared a dividend of $275 million and pay themselves back the very investment. So they can finance the purchase of Light & Power from Light & Power itself,” he said. Therefore, it was ridiculous to suggest that $25.70 per share was a fair price. Mr. Skeete said LPH could have taken the $156 million in cash which it had at November 2011 and paid off all of its loans. However, he does not fault the Fair Trading Commission for LPH’s cash cushion, defending it as a “fair rate of return.” LPH has seen even better times, he noted, earning some $56 million in net income a few years’ ago. •

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The Broad Street Journal, February 5, 2011 • Page 4 Continued from page 1

in the Sagicor Corporate Centre lobby at Wildey, a bust of the great man was unveiled and the structure renamed the Cecil F. de Caires Building. The man for whom it was named was hailed as an insurance colossus, a devoted family man and a tireless helper of poor and less fortunate people through his good works in the community. Speaking on behalf of the prime minister, Minister of State Darcy Boyce said Cecil de Caires had created a company that reflected his personality, and Sagicor had risen to the challenge by remaining an enterprising company by investing around the region and further afield. However, the Life of Barbados portfolio has continued to be of great importance to the company, he said, despite all of its more recent acquisitions. Mr. Boyce said that the Guyana-born de Caires had moved to Barbados after “transforming the operations of North American Life” Insurance Company there. In Barbados, he “achieved and even greater feat” with the operations of the same company, eventually buying them to create Life of Barbados, later adding the portfolios of Manufacturers Life and Confederation Life. He later acquired Barbados Fire & Commercial, and set a pattern for expansion “which Sagicor has followed very well,” said Mr. Boyce. His community service included helping to found the first Lions Club of Barbados and chairing the board of the Thelma Vaughn Memorial Home for the Physically Handicapped. Sagicor has itself showed a “regional orientation” and has gone beyond that, investing outside the region, he noted. Apart from this entrepreneurial expansion it had also proven itself to be a “wonderful corporate citizen” and remained profitable and well-run. It had therefore continued along the same path of business integrity followed by Mr. de Caires, and like him, he said, Barbadians should be keen to invest in insurance companies which were as well-managed as Sagicor is, and as Life of barbados had been in its time. Cecil DeCaires’ son, Dr. Geoffrey de Caires, said that when the Sagicor board decided to honour his father’s contribution to the insurance industry by naming the Wildey building after him, “they could not have picked a better tribute.” It had been very dear to him and he had spent a lot of time there, Dr. de Caires, said. He recognised the work of Jason Hope, who created the bust from photographs provided by Mr. de Caires widow, and thanked Sagicor’s Sandy Newton for her liaison efforts with his family on the whole project. His parents were married in January 1942, he said, “and while we honour my father here tonight, he would have been

ABOVE: Sagicor’s President, Dodrige Millar (left), Chairman Stephen McNamara (centre) and Dr. Geoffrey de Caires pause for a moment in front of the newly-unveiled bust of Dr. de Caires’ father Cecil at the ceremony last Thursday. BELOW: The entrance to the building.

the first to tell you that much of what he achieved in life was due to the love and support he received from his wife Thelma, affectionately known as Rose.” Dr. de Caires noted that, outside of the insurance business, his father had played a role in cricket administration, serving as both secretary and a selector on the West Indies Cricket Board in the 1940s and 50s and also as team manager for tours both in and out of the Caribbean on several occasions. Dr. de Caires noted that “inspired by the challenges faced by his second son Ian,” he helped found schools for the mentally retarded both in Guyana and Barbados, the latter being the Challenor Home. He said that his father had lost his mother at an early age, but was fortu-

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nate to have been raised by his father and a loving stepmother. But it was his father who had had the greatest influence on him, and he would often say he wanted to write a book titled, “Things My Father Taught Me,” but unfortunately never got around to doing so. Dr. de Caires said that as the years went by, his relationship with his father grew from being his son to also being his friend and hardly a day went by that they did not have a long conversation. He was also very appreciative of his insurance colleagues and employees and gave them credit whenever he or the company received awards or praise. Minister of FInance Chris Sinckler used the occasion to announce the impending proclamation of the Financial Services Commission Bill, which

who’s Who in Barbados Business 2011 EDITION

would allow for the “re-invigoration of the non-bank financial sector” because it would protect the interests of customers and investors alike. Speaking at the re-naming ceremony, Mr. Sinckler disclosed that the Financial Services Commission board would be headed by Sir Neville Nichols, who in recent times has been the head of the Securities Exchange Commission. His deputy will be Sir Harcourt Lewis. The other members of the commission will be Attorney Debbie Fraser, Retired Accountant Ken Hewitt, UWI Law Lecturer Jeff Cumberbatch, and Retired Banker Lawson Yearwood. The bill, proclaimed on Feb. 1, 2011, “will usher in the new phase of regulation” of the sector, Mr. Sinckler said. •

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