Lalor and Hylton THE Financial Sector Adjustment Company (FINSAC) appears poised to raise its stake in Life of Jamaica (LoJ) to 75 per cent, as part of a plan to sell the company.
A meeting today (Friday) is likely to seal the fate of the local life insurance giant and could lead to LoJ boss Dennis Lalor stepping down as chairman.
Mr. Lalor declined to comment yesterday but sources close to the company said they expected the situation to be resolved within days and suggested that LoJ founder Danny Williams could take a greater role at the company.
Mr. Williams was unavailable yesterday and could not be reached in Sydney, Australia, where he is spending time at the Olympics.
FINSAC is actively seeking a buyer for LoJ, it was confirmed at the start of September. Speaking at a Grace, Kennedy & Company investor briefing chairman Douglas Orane said he might be interested in parts of LoJ if they became available but FINSAC was "negotiating" to sell off the business as a whole, which did not interest his business.
New York sources again insisted yesterday that a major Texas-based life insurer has expressed an interest and is expected to visit Jamaica next week in a bid to assess the potential sale.
The news comes after The Gleaner revealed in June that LoJ needed $2 billion of fresh funds to help restructure its individual life portfolio, following a revaluation of its assets. The much prized pensions arm is said to be in reasonably good shape.
Today's meeting will see Mr. Lalor and LoJ president Milverton Reynolds try to finalise the way forward, along with FINSAC boss Patrick Hylton and his team.
FINSAC is expected to pump in more than $2 billion as part of the deal.
It is understood that the matter recently went to Cabinet, which accepted a plan for FINSAC to take over the company.
Mr. Lalor had been lobbying for another option, for the company to hold a rights issue. But last week Mr. Lalor lashed out, criticising FINSAC and its consultants for a lack of business acumen.
In July, Dr. Davies was presented with four options by Mr. Lalor.
Option One: The rights issue, which would see existing shareholders such as Mr. Lalor, a 37 per cent holding, and LoJ founder Danny Williams, a 9 per cent holding, kick in around $180 million. FINSAC would subscribe and issue new preference shares to add another $2 billion.
Option Two: Ring fence, the troubled individual life portfolio. LoJ would manage the portfolio for a fee under the direction of FINSAC or until a buyer was found.
Option Three: Sale of the company to a third party, with LoJ managing it in the interim.
Option Four: FINSAC would take a 75 per cent stake in LoJ in return for putting up the $2 billion.
It is this final option that has the strong backing of FINSAC boss Patrick Hylton and appears set to come into play.
LoJ entered into an agreement with FINSAC on May 21, 1997, whereby FINSAC agreed to inject $1.2 billion of capital, by subscribing for just over 143 million ordinary shares and just over one billion cumulative redeemable preference shares.
The preference shares cannot be converted into ordinary shares but can be voted at LoJ meetings by FINSAC representatives.
In June 1999 FINSAC agreed to purchase two office blocks from Life of Jamaica's investment funds for $658 million. The buildings are the Citizens Bank headquarters building and the Towers, a commercial office block rented to a number of tenants. The LoJ headquarters was not a part of the deal.
The insurance group is waiting to resolve the issue before releasing its financial results for 1999, as a result trading in its shares were suspended by the Jamaica Stock Exchange on Monday.
