One year ago, the government borrowed US$50 million from the International Bank of Miami to buy over Michael Ashcroft's controlling interests in BTL. Well, today that money came due in a bullet payment. Jeffrey Prosser was supposed to pay it, but he didn't. Michaela Ashcroft was rumored to be the next in line, but he didn't either. In fact, nobody paid it. Adding difficulty to its already considerably unwieldy debt management scheme, the government of Belize convinced the Capital Markets Financial Services affiliated with the Bank of Miami to roll over the debt. That simply means to extend the time of payment by a few months at a cost of what we understand is a nominal 9.25%.
So now, the question is what happens next. With me in studio to analyze the situation is Jules Vasquez who has been following what has become quite a sordid entanglement of politics and high finance. Jules what is the situation?
Jules Vasquez, 7NEWS Director
Well Indira as of tonight, the people and government of Belize are still the owners of the majority shareholding in BTL. That has been the case since the transfer was signed in April, and continues to be the case this evening. Jeffrey Prosser acts as the owner and operator of BTL, but he has never rightfully paid for the majority holdings. The only money Jeffrey Prosser paid is US$28 million to buy out Social Security's shares and that was in May. The situation now is that, as it has been confirmed to us by unofficial sources, Prosser had a promissory note with the government of Belize for US$57 million. US$50 million of it on loan from the International Bank of Miami and $7 million of it government's own money. That means, as according again to our unofficial reports, that government used $7 million of its very scarce cash resources to make up part of the US$57 million that would buy Ashcroft's shares in December. That was extended to Prosser as a loan for US$57 million, and a promissory note was signed that he would pay this all in September.
But he never paid?
Jules Vasquez,
But lo and behold September comes and Prosser's faithful knights of the realm and board members Shridath Ramphal and Ronald Saunders come to Belize basically saying "we don't have the money," "Jeffrey has problems in the Virgin Islands." So the Prime Minister with very little choice says, "Well I'll give you till November."
And that was today...
Jules Vasquez,
That's right Indira and again, he could not pay, and former Minister of Finance Ralph Fonseca had to arrange a roll over for a few months. Now, the International Bank of Miami is in a position where it can hardly make Belize default because there's another US$40 million they are also "rolling over" for us. So the IBOM had no choice really but to give that roll over. And when they roll that over, remember they are holding on to the share certificates for the Carlisle/Ashcroft shares as security for the debt.
But Jules, all this high handed transacting is in the margins because what does this mean for regular Belizean folks?
Jules Vasquez,
Well, Indira basically it means that taxpayers have been and continue to be the majority owners of BTL even though Prosser runs it and collects all the profits. The Opposition weighed in on this today with a release which I have here and that release says that "this situation provides and excellent opportunity for government to re-nationalize BTL" it goes on, "Belizeans should be given first choice at buying the Carlisle shares that have now reverted to government..." It goes on, "what cannot be allowed to happen if government chose to ignore Prosser's default and instead give him time to come up with the US$57 million so as to still own BTL." And that, Indira is really the question tonight, will government continue to face the exposure, the risk of these loans and rollovers just to save face for the quite terrible Prosser deal...a deal which had him in default with the GOB, you will recall, since September, a fact that had been secret up to now.
So, will it?
Jules Vasquez,
Well there's saving face of the Prosser deal and the rather large and consequential fact that government also has what we gather is an agreement with Prosser that he will assume Intelco's debt. And this has always been central in this deal. Central because that means covering the publicly guarantee to cover the private debts of Intelco. That public guarantee extends upwards of $40 million, and we have confirmed that $20 million of that and possibly $30 million of it are Social Security guaranteed debt.
But Jules if Prosser cannot find the US$57 million for BTL how can he find the Intelco money?
Jules Vasquez,
Well Indira I surely cannot say. In fact, even the US$28 million he did pay for Social Security shares because it was proceeds from sale of preferred stock of Vitelco in the Virgin Islands and according to the RTFC that money was supposed to have stayed in the Virgin Islands. So it is under litigation and forseeably if he loses that case, that money may have to be refunded.
So what you're saying is that it is a thoroughly entangled mess between ICC and GOB, none of them having any money liquid cash that is to speak of but both of them trying to somehow juggle ownership of BTL and Intelco?
Jules Vasquez,
Well put Indira and there are so many sidebars. Like the fact that the government has at all times, until two weeks ago, maintained that it never guaranteed that debt, never told anyone that it had loaned Prosser US$7 million from its own cash resources and from what we gather lied even to the IMF about that because the IMF tables obtained in the recent report say that US$57 million would be repaid, and as we now know it is US$50 million.
And what about the Michael Ashcroft angle?
Jules Vasquez,
Well Indira Sir, Lord Ashcroft could have been the knight in shining armor here, he has the liquidity and the experience with BTL. And he did come into town for the long weekend and he did meet with the Prime Minister and the Leader of the Opposition. In fact he declined to comment to us at 7NEWS about what was transpiring before leaving today back to England where he is to address the House of Lords on Wednesday. But from what we have been able to gather, government preferred to do it its own way, which at all times means cover, as best it can the Intelco situation that Ashcroft has at all times been openly hostile to because he considers it to have been a corrupt deal.
So what will happen to the publicly guaranteed Intelco debt?
Jules Vasquez,
Well as we understand it, the RBTT wants to recover at least US$20 to US$25 million for its Intelco debts and that of course is in U.S. dollars. Social Security will quite likely lose on this because of improperly secured debt. But remember that whoever takes over Intelco - basically a dead cow, and the only person would be the owner of BTL, does it to save the Musa administration's political face and does so at a cost. And that cost is greater than the useful asset value. And they must recover that cost and the only way to do that it tack it on to the BTL rates. That is, in Prosser's case, it would mean adding the Intelco debt to his guaranteed rate of return meaning that you would pay to cover Intelco's losses with higher rates. Or it could go the other way, they could just scrap Intelco and say we can no longer hitch that to the BTL horse and just scrap that and we take the loss now but either way regular folks will have to pay for the Intelco debt either through higher rates or through a loss in the debt in the publicly guaranteed debts of Intelco. But either way regular folks will end up paying.
That's a lot of money.
Jules Vasquez,
Yeah that is the bottom line that if you have a questionable act, a corrupt act, in government and I am saying it is a corrupt act to use public funds, Social Security funds secretly without any public knowledge to guarantee the debts of a private company, a startup company, that is a corrupt act and any corruption at the end of the day is a tax on the poor or the regular folks.
Well Jules we'll keep watching to see what government does. If it takes the UDP's recommendation to re-nationalize BTL, which is a thought that the Prime Minister had mentioned, or if it continues to hold the bag for Jeffrey Prosser, who remains much encumbered by legal and financial woes. And you can weigh in on the debate by voting in our online poll.