The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A “massively improved” offer for the Hayward estate’s Grand Bahama Port Authority (GBPA) stake, with $60 million guaranteed “upfront”, plus interest from Hutchison Whampoa and other buyers has allegedly been jeopardised after the Supreme Court was asked to intervene.

The ‘upfront’ payment was part of an improved deal that ex-GBPA chairman, Hannes Babak, says he and attorney Andre Feldman were able to extract from BlackRock, the $4.5 trillion asset manager, after two of the three trustees for the late Sir Jack Hayward’s family trust were dismissed.

That left Prometheus Services Ltd, an entity controlled by Messrs Babak and Feldman (see other article on Page 1B), as the sole trustee until Sir Jack’s children and grandchildren persuaded Justice Indra Charles to last month replace it with Judicial Trustees.

Mr Babak, in a November 5, 2015, affidavit obtained by Tribune Business, alleges that the appointment of ex-Cabinet minister, Ryan Pinder, and his Deltec Bank & Trust colleague, Paul Winder, as guardians for the Sir Jack Hayward Discretionary Settlement 1993 threatens to derail both the BlackRock deal and offers from other potential GBPA purchasers.

He revealed that Hutchison Whampoa, the Hong Kong conglomerate, had sent word it was “interested in purchasing some or all of” Intercontinental Diversified Corporation (IDC), the holding company for the GBPA and its Port Group Ltd affiliate.

And Mr Babak also alleged he and Mr Feldman had been talking to a UK-based investment house, which was planning to reach out to potential GBPA buyers with “an average net worth in excess of $5 billion”.

All these sales efforts have effectively been frozen, and placed into ‘cold storage’,as a result of the Judicial Trustee Order obtained by the late Sir Jack’s family at a hearing where only their attorneys were present.

Mr Babak alleged that everything done to find a buyer for the Hayward trust’s 50 per cent equity interest in the GBPA “has been thrown into doubt” by the replacement of Prometheus with the Judicial Trustees.

“I do not know what other opportunities we may be missing,” the ex-GBPA chair added. “There were certainly other offers on the table when the Ex-Parte Offer was made.

“In addition to BlackRock, there were a number of other purchasers who were interested in purchasing the Hayward share of IDC and who, prior to the Ex-Parte Order, we were actively pursuing.

“Firstly, Derek Harrington, a former trustee of the trust (and ex-GBPA director), has been in touch with Hutchison Whampoa. They have apparently indicated to him that they might be interested in purchasing some or all of IDC,” Mr Babak added.

“Because of their previous interest in purchasing IDC, their interest is potentially extremely significant and useful. We are waiting for a formal letter of interest from them so we can sign a non-disclosure agreement and begin negotiations.”

That, though, is unlikely to happen as long as the Supreme Court and Judicial Trustees are in charge of the Hayward trust. Prometheus’s application to set aside their appointment, and be returned as sole trustee, is due to be heard this week, on November 19-20.

The outcome of that hearing is also being awaited keenly by the Government. Tribune Business sources familiar with developments, speaking on condition of anonymity, have revealed that Prime Minister Perry Christie, accompanied by a team of ministers and officials, has been waiting to visit Hong Kong - a meeting with Hutchison Whampoa to discuss the GBPA, and a potential deal, at the top of the agenda.

Mr Babak, meanwhile, alleged in his affidavit that he and Mr Feldman had also been talking to STS Capital Partners (UK), which felt it had “a number of clients/families who might be willing to buy out the trust’s interest in IDC”.

These potential buyers, according to an October 15, 2015, e-mail sent to Mr Feldman, ranged from “multi-billion dollar family offices, private equity, real estate developers and consortiums and sovereign wealth funds”.

And interest from “two very prominent ‘family offices’ in the US has also been stalled by “the current uncertainty” surrounding the Discretionary Settlement and who was in charge.

Summing up the current situation succinctly, Mr Babak said: “It has not been possible to progress any negotiations following the Ex-Parte Order.

“I am totally committed to doing whatever I can to get a sale through as soon as possible in accordance with the settlement agreement [with the St Georges], so that we can generate liquidity for the trust.

“However, at the moment, it is impossible for me to do anything and Prometheus cannot undertake any activity...... In order to bring the BlackRock deal back on track and liaise with further potential buyers, it is essential that we have certainty, and for that Prometheus needs to be reinstated.”

Mr Babak’s affidavit emphasises that the GBPA and Port Group Ltd’s ownership and, by extension, its future and that of Freeport and its development, have been thrown into turmoil once again.

These concerns were expressed more forcefully by Mr Feldman in his own November 5 affidavit, in which he warned that the move by Sir Jack’s children and grandchildren could “irrevocably damage” any chance of concluding a deal with BlackRock, the world’s largest asset manager and private equity fund.

Apart from stopping the GBPA sale process “in its tracks”, Mr Feldman argued that the latest litigation threatened to undermine the value - and purchase price - of Freeport’s quasi-governmental authority and its associated investment/infrastructure assets.

And he also warned that the appointment of Messrs Pinder and Winder as Judicial Trustees could render the trust “technically insolvent” as a result of the fees they have been allowed to charge.

Suggesting that Prometheus Services had been subjected to a ‘legal ambush’, Mr Feldman said the Hayward family had prepared their legal challenge in “secret” despite being notified of the two trustees’ removal.

Suggesting that the Hayward trust was now exposed to “confusion and danger”, Mr Feldman alleged of the latest legal battle: “It has stopped the sale process in its tracks, stopped the court application to approve the settlement of the children’s litigation from going ahead, and further harmed the already fragile reputation of IDC and its subsidiaries, which had suffered immensely from the disputes between Sir Jack, his children and the St George family.

“I believe it is likely that this has also damaged the value of the Settlement’s interest in IDC. It is yet another example of wholly unnecessary and counterproductive litigation which has bedevilled this family.”

The reference to ‘children’s litigation’ concerns a settlement to previous litigation initiated by Sir Jack’s children and grandchildren, in which they were to be restored as beneficiaries of the Sir Jack Hayward Discretionary Settlement 1993.

That has yet to occur, and it is thought that one of the grounds that Prometheus will employ to overturn the Judicial Trustees Order is that they have no standing to bring such an action. Because they have not been restored as beneficiaries, the argument goes, they have no interest in the trust.

Mr Feldman, meanwhile, said he had been informed by financial advisers that the Order - and subsequent litigation - meant they could no longer “go into the market and speak to prospective purchasers” of the GBPA and Port Group Ltd.

“The timing of the Ex-Parte Order is extremely unfortunate for the progression of the BlackRock deal and/or any other potential transaction, of which there are a number of opportunities which were being pursued,” Mr Feldman alleged.

“Accordingly, I am very worried that IDC’s price has deteriorated sharply in light of recent events.

“For completeness, I should note that if the Ex-Parte Order is left to stand, my view is that any sale of the trust’s interest in IDC will be substantially delayed; litigation will continue for many years; the St George family will be able to take advantage of the situation to marginalise the Hayward family; and the prospect of any of the current beneficiaries or the plaintiffs receiving any money from the trust in the next few years will be exceedingly remote.”

Mr Feldman added that the appointment of Deltec’s Messrs Pinder and Winder as Judicial Trustees was “potentially damaging”. Both have been permitted by the Supreme Court to bill for their services at $500 per hour, whereas Prometheus charged no fee for its trustee services.

“Assuming they were to work only three days a week in relation to the trust, (an in fact this is conservative given the number of issues involved), it would cost the trust approximately $90,000 per month,” Mr Feldman alleged.

“That is money the trust simply does not have, and risks technical insolvency for the trust.”