The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AN outspoken QC yesterday said it was “very odd” for ICD Utilities to borrow $18 million and finance the buy-out of its minority shareholders days before its BISX de-listing.

Fred Smith QC, the Callenders & Co attorney and partner, who is representing SeSaChe Ltd in its fight to overturn the Government’s approval of the buy-out, said the borrowing appeared to contradict the deal’s rationale.

He added that Emera, the now-100 per cent owner of Grand Bahama Power Company, had always argued that a key reason for its $35 million offer to purchase the interests of Bahamian shareholders was to ‘simplify’ the latter’s corporate ownership structure by taking out ICD Utilities. Yet notices published on the Bahamas International Securities Exchange (BISX) and Bahamas Central Securities Depository (BCSD) reveal that ICD Utilities, which today will be delisted from the former, has borrowed $18 million from Scotiabank (Bahamas) to fund the payouts to local investors who elected to take the all-cash option.

“ICD Utilities wishes to advise its shareholders and the general public that on January 12, 2018, it entered into a loan agreement with Scotiabank (Bahamas) for an amount of up to $18 million for the purpose of facilitating payment to its shareholders to effect the redemption of certain shares,” the notice said.

The Scotiabank (Bahamas) loan is for a five-year period, and carries a 4 per cent interest rate equivalent to the Central Bank of the Bahamas’ discount rate. Interest payments will be made every six months.

The loan agreement, concluded just five days before ICD Utilities’ de-listing, makes clear that the former ‘holding vehicle’ for a 50 per cent equity interest in GB Power is the borrower - not the utility itself or Emera.

While the debt financing arrangement is not surprising in one sense, given that ICD Utilities had insufficient assets and cash flow of its own to finance the payout, questions are likely to be asked as to why Emera did not fund this from its own resources or take out the loan itself.

The notice on the BCSD website is headlined ‘Emera enters into a loan agreement with Scotiabank (Bahamas)’, even though the actual text makes clear that ICD Utilities is the borrowing entity.

Tribune Business yesterday submitted questions to GB Power/Emera on which entity will be responsible for ensuring repayment of the Scotiabank (Bahamas) loan, and how such repayment will be financed and structured. In the absence of further clarity, some observers may conclude that GB Power customers may be called upon to finance the interest and principal payments.

“I can’t begin to fathom the corporate machinations of Emera and GB Power,” Mr Smith told Tribune Business. “All I can focus on is protecting my client’s rights.

“It certainly seems odd that ICD Utilities can now be borrowing money... It seems very odd that they would create a liability for ICD Utilities when they said one of the objectives of the transaction was to simplify the corporate architecture and structure, and get rid of ICD Utilities.”

The $18 million borrowing, though, hints that Bahamian minority shareholders in ICD Utilities have effectively ‘split in half’ over whether to accept an all-cash payout from Emera or exchange their shares for the Canadian utility’s Depository Receipts.

Tribune Business sources, speaking on condition of anonymity, told this newspaper that local investors had divided almost 50/50 between taking the payout and Emera’s Depository Receipts, defying expectations that the majority - if not all - would take the cash in a $35 million offer.

Mr Smith, meanwhile, argued that the buy-out’s closing would not render SeSaChe’s Judicial Review action irrelevant and a “nullity”.

“I am shocked to hear that it has closed, but I can certainly say I do not consider it reduces my action to a nullity; null and void,” he told Tribune Business.

“Anything on paper can be undone, and if the lawful approvals were not obtained and my client’s rights were breached, then my client can continue to pursue its court action, for which the courts gave leave to issue Judicial Review last week. We will shortly be serving the notice of motion on the Government and continuing.”