The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Finlayson family has “watered down” their equity in Associated Bahamian Distillers and Brewers (ABDAB) to better secure the $4.7 million liability to City Markets pension plan beneficiaries, describing this as “the best solution for everyone involved”.

Mark Finlayson, the benefactor’s representative, told Tribune Business that the union representing pension beneficiaries had been issued with preference shares in ABDAB and its affiliates as a way to secure the obligation to them.

This, together with the injection of capital by new investors, had reduced the ABDAB equity interest held by General Bahamian Companies (GBC), the Finlayson family-owned vehicle, from 70 per cent to around 49 per cent, he confirmed.

The deal, as outlined by Mr Finlayson, has effectively switched the security for the former supermarket chain’s pension beneficiaries from illiquid real estate assets that have proven “impossible” to sell (see other story on Page 1B) to a more liquid investment.

With no buyer found for the former City Markets head office on East-West Highway, the pension beneficiaries -via their trade union - now have the opportunity to receive dividend payments on those preference shares and, potentially, a cash payout of everything owed to them by May 8 next year.

Via a Supreme Court Order on December 17 last year, the trustees for the Bahamas Supermarkets Profit Sharing Retirement Trust (the pension plan) agreed to “come to some sort of settlement” with the beneficiaries before June 17, 2014.

This provided the two sides with a six-month window to work out a deal, and Mr Finlayson told this newspaper the deal ultimately struck on May 8, 2014, involved the provision of “certain guarantees” to the union.

Accompanying this was the issuance of preference shares to the union, the Bahamas Commercial Stores and Warehouse Workers Union, which is receiving any dividends and monies paid out on the beneficiaries’ behalf, passing these to them.

To protect these liabilities, both pension fund trustees and union representatives now sit on the Boards of ABDAB and the affiliates that issued the preference share debt.

This was confirmed this week, after ABDAB confirmed that James Gibbon, Donna Moss and Christine Turnquest were all elected to its Board of Directors at a July 22, 2014, annual general meeting (AGM).

“The basic deal is this,” Mr Finlayson told Tribune Business. “Nothing can be done with these companies until the preference shares are satisfied.

“There’s a total of $4.7 million that remains outstanding. In the first instance, it’s in the form of a pension, and those preference shares more than meet the needs of the pension.

“There’s also an option that, 365 days after the issue, on May 8, 2015, that those shares be bought back for the full $4.7 million by the companies.

“The monies will go directly to the pensioners. They end being a lot better off than before, and have the option of a cash payout or staying in.”

Thus according to Mr Finlayson, the pension beneficiaries can either elect to take a full cash payout that will cover 100 per cent of their interest, or opt to stay in as investors for the long-term.

ABDAB, despite having sold its equity stakes in Commonwealth Brewery and Burns House to former partner Heineken in 2011, retains substantial real estate investments that are now its main assets.

Mr Finlayson told Tribune Business that ABDAB had issued “the majority of the preference shares”, and owned $40 million worth of real estate to back them.

“It’s a real company with real assets, and so forth, and has been a public company since 1986,” he added, suggesting these factors should give extra comfort to both the union and its pension beneficiaries.

Disclosing that the pension fund trustees have four seats on the ABDAB Board, Mr Finlayson said: “There’s nothing that can happen without their approval. We have a settlement that makes sense, and works for the beneficiaries. We’re in a much better position now.”

To achieve this, Mr Finlayson said he and his family had to sacrifice General Bahamian Companies’ position as ABDAB’s majority/controlling investor, although they remain the largest shareholder.

“In order for the [pension fund] deal to happen, further investment had to be made in the company by other shareholders,” he explained. “Monies had to be injected, and we’ve been watered down.

“It’s a larger Board, not as closely run by my family, but that’s fine, as we want to spend less time involved.”

Summing up the settlement’s implications, Mr Finlayson suggested it would ultimately result in a ‘win-win’ situation for all involved.

“I think that at the end of the day all the pensioners are going to be made whole,” he told Tribune Business. “The ABDAB shareholders will be better off over a period of time, and the new shareholders like it.

“This is the best deal for everyone involved. Everyone ends up in a better situation.”

Mr Finlayson said 70 per cent of the City Market beneficiaries were being represented by the union, while 30 per cent were being looked after by Freeport-based attorney, James Thompson.

Tribune Business understands that Mr Thompson had earlier this year requested that the preference shares allocated to his clients be redeemed, and that the obligations to them instead be secured by ABDAB transferring the $2 million Trinity Building to his ownership and control.

That property is located at the corner of West Bay Street and St Albans Drive, next to the Rubis gas station.

Mr Thompson had proposed taking over ABDAB’s 70 per cent stake in the Trinity Building, with 50 per cent of the monthly rental income from the property’s tenants going to pay the retirement income that his clients would have been due under the City Markets pension plan.

This proposal, though, is understood to have been rejected by Mr Finlayson and ABDAB.