By Al Edwards, Business Co-ordinatorTHE FINANCIAL Sector Adjustment Company (FINSAC), charged with the task of resolving the problems of solvency and liquidity in the financial sector recorded a net loss of J$26.64 billion for the fiscal year 2001, according to its auditors Deloitte and Touche.
Cumulative losses for the four years of FINSAC's existence now total $125 billion.
With FINSAC bloodied but unbowed, its managing director Patrick Hylton said in the company's annual report that it had effectively completed its mandate of restoring liquidity and solvency to distressed institutions, strengthened the financial management capability of intervened institutions and created an attractive environment for investors to re-capitalise financial institutions.
In the Annual Report Mr. Hylton said: "So as FINSAC continues to wind down, what are the remaining tasks ahead in the next fiscal year? I think there are four specific achievements we need to aim for. One is to complete the sale of our shareholding in NCB. The second, is to complete the sale of our non-performing loan portfolio. Our third task is to complete the sale of our shareholdings in Life of Jamaica. This is already underway and a successful outcome appears imminent. Finally we need to find an effective strategy or methodology to accelerate the sales of the commercial real estate that we are holding. So far we have met with limited success in this area, but recent expressions of interest and the overall market indications are encouraging. It is likely that the end of fiscal 2001/2002 will see FINSAC relegated to history.
There was a significant fall off in FINSAC's current and non current assets with a figure of $19.2 billion recorded in 2001 as opposed to the previous year's figure of $24.5 billion. There was a slight increase in its income generated in the main from interest on loans. FINSAC generated income for the year under review of approximately $4 billion as opposed to 2000's $3.4 billion. However operating expenses increased to $18.7 billion due in part to interest on loans and advances.
Although total expenses increased marginally from $433 million to $437 million, there were significant increases/
decreases in individual expense items. Most debts which were considered bad, had been provided for in previous years. The provision for bad debts, therefore decreased by $137 million ($169 million in 2000,$32 million - 2001).
PROFESSIONAL ADVISORS
FINSAC had to utilise the services of professional advisors in assisting in the preparation for and advising on the disposal of major and unique investments and debts, with a resulting increase in the costs in this category of expenses. Foreign and local professional fees increased by $65 million ($76 million-2000, $141 million-2001) and $17 million ($22 million-2000,$39 million-2001), respectively.
During the year FINSAC incurred maintenance charges from investments properties that were vacant. These charges helped to increase rental and building maintenance charges by $20 million ($12 million-2000, $32 million-2001.
DURING THE FISCAL YEAR UNDER REVIEW, FINSAC:
Disposed of its holdings in Union Bank of Jamaica to RBTT
Consolidated its holding in the NCB Group through the restructuring of the Group
The Government through the Debt Management Unit of the Ministry of Finance assumed the debt portfolio of FINSAC with effect from March 31, 2001
Injection of capital for Life of Jamaica
NON PERFORMING LOANS
As at March 31,2001 FINSAC was managing 25,500 non-performing loans demand loans, mortgage accounts and credit card accounts. During the fiscal year 2000-2001, the portfolio was increased by the acquisition of 3,500 additional loans and 5,200 credit card accounts previously managed by NCB. For the period under review, loan accounts valued at $838.5 million were restructured bringing the cumulative total for the restructuring/rescheduling of such loans to $9.7 billion.
The Non performing loans Unit's achievements during the 2000/2001 financial year were: total loan collections $5.2 billion as at March 31, 2001 - (March 31, 2000 - $3.3 billion)
2,060 accounts now restructured with a total value of $838 million reduction in the number of companies in receivership a major hotel returned to the principal for management after the conclusion of negotiations regarding indebtedness. Major manufacturing companies restructured to ensure continued production.
DISPOSAL OF
NON-HOTEL REAL ESTATE
During fiscal year 2000/2001 some 116 real estate holdings totalling over $1.2 billion were sold. This compares with 83 properties totalling $0.64 billion over the previous year and brings the cumulative total for the sale of properties to over $11.7 billion as at March 31,2001 up from $9.3 billion as at March 31,2000
DISPOSAL OF HOTEL INTERESTS
Sales were completed on four hotels properties totalling US$29.25 million. Of the remaining hotels, Ciboney has been leased to a leading operator in the hospitality industry for a three year period, with an option to purchase at any time within the lease period. The disposal of FINSAC's 49 per cent interest in Jamaica Grande, however remains the most challenging, due to its complex ownership structure. The hotel assets disposed of during this period were:
The Crowne Plaza
Navy Island
Terra Nova
Boscobel Beach Hotel
COMPENSATION TO
SENIOR EXECUTIVES
Of the total staff emoluments of $84.9 million, basic salaries and allowances for the 5 senior executives accounted for $24.6 million. Total executive emoluments compared with $42.1 million paid to 9 managers in the previous period.
