By Dennise Williams, Staff ReporterWHILE IT has been reported that investment banker Dehring, Bunting & Golding is expected to purchase AIC's debt to the Government resulting from the purchase of the National Commercial Bank (NCB), there is the question as to whether dividends paid to Michael Lee-Chin, the principal of AIC, by NCB could support the repayment of this loan.
The controlling shareholding of NCB was sold in March 2002 for J$6 billion to AIC (Barbados), an entity controlled by Michael Lee-Chin. NCB's web site reveals that, "A new era began for NCB on March 19, 2002, when AIC Limited, Canada's largest privately held mutual fund company, acquired just over 75 per cent of the shareholding in the bank from FINSAC."
With this acquisition, NCB's ownership structure became clearly defined. AIC Limited is the 11th largest mutual fund company in Canada, and in 2001 the company held more than J$445 billion under management for approximately 1 million Canadians. Michael Lee-Chin, a Jamaican-Canadian, is Chairman and Chief Executive Officer of AIC Limited and owns 90 per cent of the company, with the remaining 10 per cent being owned by staff.
Specifically, the Government is seeking to unload an approximate loan portfolio of $3.35 billion arising from the sale of their 75 per cent stake holding in NCB. Mr. Lee-Chin, through AIC, paid down $2.65 million in cash. According to previously published Wednesday Business reports, Keith Collister, business development manager at First Global Stockbrokers explained how the transaction took place, "AIC (Barbados) is the company that bought a controlling interest in NCB for cash plus a note (debt instrument)." And in relation to the sale of this debt, Mr. Collister stated that, "The most likely scenario is that the Government auctions the debt instrument, as it needs money probably with first refusal to AIC. Although in that scenario someone else could buy it."
However, instead of DB&G buying the debt, it is possible that AIC, through the dividends received from its NCB investment, will be in a position to pay off, or make a significant dent, in the outstanding obligation.
A HEALTHY COMPANY
NCB is a healthy company, paying out dividends on a consistent basis. According to the unaudited results of the group for the quarter ended December 31 2003, net profit for the group was J$746.2 million compared to J$481.0 million for the corresponding quarter in the previous year. This positive performance is mainly attributable to a J$1.4 billion increase in net interest income when compared to the corresponding quarter in the previous year.
At December 31 2003 total stockholders equity was J$13.4 billion, an increase of J$547 million or 4.3 per cent when compared to the end of the previous financial year. Their audited results for the year ended September 30, 2003 revealed a net profit of $2.8 billion with total stockholders equity of $12.9 billion. This then translates into a company that can well afford to pay out dividends on a regular basis. And as the majority shareholder, AIC (Barbados) and ultimately Michael Lee-Chin, would stand to benefit the most from this policy. States Mr. Collister, "NCB can be of assistance in paying off the AIC debt through a huge dividend to its parent."
For the year 2003, NCB made the following dividend distributions:
Interim dividend on February 27, 2003 of $0.34 per share.
An interim dividend of $0.06 cents per stock unit will be paid on August 19, 2003
Interim dividend of $0.06 cents per stock unit be paid on November 21, 2003
An interim dividend of $0.09 cents per share was approved for the quarter ended 31 December 2003.
A final dividend in respect of 2003 of $0.21 cents per share was approved and is payable on January 19, 2004.
There are 2.5 billion NCB shares outstanding.
However, according to Mr. Collister, "NCB is unlikely to be able to issue a high enough dividend to pay off the full amount, but I haven't done the numbers."
The NCB group is organised into three main business segments:
Banking This incorporates retail and corporate banking services.
Wealth management This incorporates investment management, pension fund management and trustee services.
Insurance This incorporates life insurance and insurance brokerage services.
Other operations of the group include data processing and money remittance services.
NCB Jamaica Limited is incorporated in Jamaica and licensed under the Banking Act, 1992. The Bank is a 75 per cent subsidiary of AIC (Barbados) Limited. The ultimate parent company is Portland Holdings Inc., incorporated in Canada. The Bank is listed on the Jamaica Stock Exchange and the Trinidad and Tobago Stock Exchange.
