The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

BAB Holdings’ principal yesterday said the company found it “offensive” to learn that the National Insurance Board (NIB) had decided not to participate in its $10 million private placement issue via the media, rather than informing it directly.

Stating that the BAF Financial parent was “seeking advice” as to whether it could take legal action over the $10 million preference share issue’s contents becoming public, Chester Cooper reiterated comments carried in Tribune Business yesterday.

But he also argued that the private placement seemed consistent with previous NIB investments, indirectly questioning management’s position that it was outside the social security system’s investment guidelines.

He added: “The offer to NIB was made in good faith to participate in an attractive investment opportunity in a growing, 100 per cent Bahamian-owned company; a regulated entity with almost 100 years of proven success in the Bahamas, and Cayman Islands and Turks & Caicos Islands in the last five years.

“The company consistently reports stable and attractive earnings with Return on Equity (ROE) well in excess of 15 per cent.”

And Mr Cooper said: ”Having perused the latest annual report of NIB, our offer seems consistent with many similar investments in banks, insurance companies, and holdings in non-Bahamian entities, private placements as well as securities not listed on BISX in which NIB has invested.

“Our private placement, therefore, stood on its own strength and merit, and required no interventions whatsoever. As a practical matter, with the limited options available on BISX, it would be impractical and imprudent for NIB to limit its opportunities by such restriction.”

Tribune Business reported yesterday over whether it should fully take-up their parent company’s $10 million preference share issue.

Algernon Cargill, NIB’s director, alleged in a Supreme Court affidavit filed last week that management had recommended NIB “not participate” in the private placement by BAB Holdings, the entity that owns 100 per cent of BAF Financial, the life insurance and financial services provider.

Yet he claimed that this was overturned by NIB chairman, Greg Moss, and his Board sidekick, Patrick Davis, via the Investments Committee, creating another issue in the power struggle between themselves and the director.

Phaedra Mackey-Knowles, NIB’s deputy director and vice-president of investments, in a September 24, 2012, report to Mr Cargill described the BAB Holdings offer as carrying an interest coupon of 6.75 per cent (Bahamian PRIME plus 2 per cent), payable semi-annually.

The $10 million offer was designed “to strengthen the company’s capital base; invest in the development of the company’s products and offering; increase the company’s infrastructure and reduce the debt related to the company’s acquisition”.

BAB Holdings, the report said, intended to use $3.75 million of the proceeds to pay down bank debt taken on when BAB Holdings’ principals, Chester Cooper and attorney John Wilson, acquired BAF Financial (then British American Insurance Company) via a management-led buyout in 2007. Of the remainder, some $3 million would be used to “extinguish” more debt in the form of a “note payable”, leaving $3.05 million in capital for expansion and $200,000 to cover offering costs.

Describing BAB Holdings and its primary asset, BAF Financial, as “relatively stable”, she nevertheless wrote: “The offering of $10 million exceeds the company’s net worth of $9.8 million and its total common shareholders equity of $2 million.

“The company does not trade on BISX, and falls outside the parameters of NIB’s Investment Policies and Guidelines of investing in private placements and perpetual offerings.”

As a result, she concluded that NIB management “is not recommending this investment”.