The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

There is no evidence to prove that the Government ever received the $7 million ‘balance’ for its 7.5 per cent equity stake in the Grand Bahama Port Authority (GBPA), it has been revealed.

The Hawksbill Creek Agreement Review Committee, in attempting to answer what has become an ‘age-old mystery’, said there was “no documentation” to show that the Treasury had ever received 82.3 per cent of the purchase price agreed by the GBPA.

Given that this ‘consideration’ was never seemingly received by, or paid to, the Treasury, Tribune Business sources yesterday suggested that this meant the Government was still the owner of a 7.5 per cent GBPA stake.

The Committee’s report further acknowledged that the GBPA’s annual returns, filed with the Registrar General’s Department, continued to show the Government (via the Treasurer) as the owner of these shares as recently as 2012.

The fate of the Government’s original GBPA equity stake, which it acquired in 1968, one year after ‘Majority Rule’, has never been fully or satisfactorily answered despite numerous attempts to do so.

The issue was raised again during the 2006-2010 shareholder dispute at the GBPA between the Haywards and St Georges, and has become relevant once again given the Christie administration’s push for the Government to obtain equity stakes in key Port Group companies.

Apart from obtaining two director seats on the GBPA Board, the Government is set to gain a 10 per cent equity interest in a newly-formed company that will hold the Hayward/St George interests in Freeport Commercial and Industrial and the Grand Bahama Development Company (DEVCO).

Some observers, though, may ask whether this equity stake - with the Government also gaining an option to acquire a further 5 per cent - is really necessary if it still holds that 7.5 per cent.

And, if it does, it raises questions as to why the Government has not taken a more proactive stance in seeking Board seats - and greater influence over Freeport’s governance and development - earlier than its latest April 26, 2016, agreement with the GBPA.

The Committee has thus become the latest group seeking to gain answers to the mystery, and they managed to elicit a lengthy June 8, 2015, letter from Sarah St George, GBPA vice-chairman, setting out the transaction.

The Government initially acquired the 7.5 per cent stake in 1968, and this was converted to a holding of equivalent magnitude in Benguet Consolidated, the publicly-traded Philippine gold mining conglomerate.

The GBPA was merged with Benguet because of the “economic uncertainty for Freeport”, with the Government gaining the 7.5 per cent stake in return for approving the deal. The then-Pindling administration paid $912,648 for the equity, with the price raised via a seven-year government bond.

However, the expiration of an agreement that allowed US companies to own Philippine based-assets resulted in Benguet spinning-off all non-Filipino interests - including the GBPA - in 1970.

The GBPA was ultimately acquired from Benguet by Panamanian-domiciled Intercontinental Diversified Corporation (IDC) in 1972, with the latter becoming listed in New York in 1974.

“Shareholders could exchange Benguet shares for IDC or tender their shares for value,” Ms St George wrote. “The Government elected to accept a fair market price for its 7.5 per cent interest, and GBPA was restructured solely as the municipal and regulatory arm.”

The Government chose to receive the $8.708 million purchase price for its share in two tranches, Ms St George said. Apart from a $1.545 million cash payment, the GBPA also issued a two-year promissory note (an IOU, or bond) to the Government for the $7.163 million balance.

Ms St George attached numerous correspondence, including letters from then-finance minister Carlton Francis, and internal GBPA documents to support her account.

However, the two-year promissory note was subsequently pledged to Royal Bank of Canada (RBC) as security or collateral, although the quarterly payments it guaranteed were still to be paid to the Government.

An October 30, 1972, letter from the GBPA to the Royal Bank acknowledged that the note guaranteeing the ‘shares payment’ to the Government had been “hypothecated”, and that the quarterly payments “are to be paid to you for the account of the Government of the Bahamas”.

Ms St George concluded: “From these letters, it is clear that the Government received the remaining balance of the $7.163 million note from Royal Bank, and IDC satisfied its obligation.

“Thus, the Government indeed agreed, and the Treasury received in full, the stated $8.7 million in consideration for its 7.5 per cent equity interest in GBPA.”

The Committee, though, did not reach the same conclusion as Ms St George, finding that the $7.163 million note “appears to have been cancelled”.

“However, no documentation was provided showing that the $7 million was paid into the Government’s account at Royal Bank,” the Committee said.

“Moreover, this notwithstanding, the annual return at the Registrar General’s Department as of 2012 still reflects that the Government is still a 7.5 per cent shareholder of GBPA.”

It would therefore appear that the inquiry results are inconclusive, and the mystery continues.

One coincidence in the Committee’s report is that one of the three letters considered critical to the Benguet transaction by the 1970 Royal Commission report was written by Baltron Bethel, then acting secretary to the Cabinet.

He is now Sir Baltron, senior policy adviser to Prime Minister Perry Christie, and member of the Hawksbill Creek Agreement Review Committee that wrote this latest report.