By Lavern Clarke, Staff ReporterWHEN DOUGLAS Chambers meets today with creditors of Town and Country Resorts Limited in Ocho Rios, he will tell them that the surplus estimated from winding up Premium Investment Limited is insufficient to cover all debts.
Town and Country Resorts, which trades as Enchanted Gardens, has estimated liabilities of $279.35 million and "zero assets", according to a September 18 directors report prepared by Mr. Chambers, and obtained by The Financial Gleaner. Just over 65 per cent of the total is for taxes and penalties.
The estimated surplus from Premium Investment, TCRL's parent company, was $210.83 million at the time its shareholders, principally Edward Seaga, filed for voluntary liquidation.
Seaga said in August that he was winding up Premium, a solvent company, to pay off Town and Country's debts, which according to audited accounts, had current assets of $6.7 million and accumulated deficit of $323.67 million to December 2001.
FULL SURPLUS
But informed sources say, Mr. Chambers is not totally convinced he can recoup the full surplus, and that everything rides on whether he secures a buyer and a good price for the $761 million resort property.
As to when creditors will be paid, the liquidator said in his report that he was unable to determine when Premium would be finally wound up.
Mr. Chambers who assumed control of Town and Country at the same time he was appointed to wind up Premium Investment - both were part of Seaga's Premium Group of companies - will be telling the meeting of creditors, of which there are about 250, that 'compromises will have to be made by some' of them.
The meeting is a precursor to the planned filing for 'creditors liquidation' to wind up Town and Country. Chambers said in his report that the plan is for Enchanted Gardens which continues to offer tours, to cease all trading by September 30.
BARELY SUFFICIENT
Income from the tours, says Chambers, is 'barely sufficient' to cover salaries, maintenance and other operational expenses.
According to the restated accounts of Town and Country to September 1, the majority of the debts is $182.63 million of outstanding taxes and penalties.
The GCT portion has now been estimated at $155.12 million, broken down as follows by Chambers:
Outstanding tax: $13.78m
Payment penalty: $4.08m
Returns penalty: $2.88m
Surcharge: $2.18m
Accumulated interest: $132.26m
The rest is statutory taxes outstanding to 2002, covering National Housing Trust, $15.53 million; National Insurance, $2.64 million Education Tax, $26,536; PAYE, $4.75 milion; and HEART Trust, $4.49 million.
Other liabilities include $6.3 million owed to Dennis Joslin Jamaica, representing a 1998 overdraft with Century National Bank, which was taken over by FINSAC during the financial sector rescue; another 6.5 million in overdrafts owed to National Commercial Bank and Bank of Nova Scotia, and $60.6 million of trade payables. Informed sources say Chambers has decided that the workers - whose redundancy and outstanding salary costs amount to $21.31 million - will get priority, and that all other creditors should be prepared to negotiate.
The September 18 report alludes to this under the heading of 'Legal Position of Creditors'.
"As the company has no assets to redistribute, all classes of creditors - secured, preferential, and unsecured - are in the same position, which is that they cannot legally recover any of their debt from the company," he said. "As such all creditors are asked to recognise that the recovery rate of their debt from TCRL is zero cents to the dollar."
LUCRATIVE DEAL
Sources say there is a back up plan if no lucrative deal emerges for Enchanted Gardens, to wind up TCRL, form a new company and issue shares.
Premium Investments - the holding company for Enchanted Gardens' assets - has total assets, including furniture and fittings, estimated at $794.88 million.
Liabilities on the company include secured debt of $173.4 million and interest of $195.7 million. Sources say the secured debt includes amounts owed to Ansbacher (Cayman) Limited, a banking operation.
Premium's declaration of solvency also included $10 million to finance the liquidation costs, but the Financial Gleaner was advised that those costs will come in at more than twice the figure. Another $78.7 million has also been set aside as "proposed dividends" which insiders say is to go to preference share holders, excluding Seaga, who is said to hold approximately 50 per cent of preference shares.
Combined, Premium's liabilities were estimated at $584.05 million.
Seaga decided to wind up Premium shortly after the courts ruled that the companies were liable for unpaid General Consumption Tax incurred by Enchanted Gardens, though the property was being managed by an overseas company, DHC Hospitality, at the time.
