After three withering weeks of public hearings into the transactions of DFC between 1999 and 2004, it seems that bad deeds and bad deals at the DFC could fill more than a few volumes. Today we learned that when government was forced to pre-pay a DFC bond instrument, it had to fork out an early payment penalty of US$9.6 million. And there was more, as in his third day of testimony, Franklin Magloire detailed how the DFC was in too deep with funding Universal Health Services.
Franklin Malgoire, DFC Project Manager
"A loan package of $28 million was approved for the entire project. At the time DFC had certain liquidity problems and so the Belize Bank was supposed to have provided bridge financing for the project; bridge financing to the tune of $17 million was provided. Eventually the Belize Bank, through discussions, and in the package you will see the correspondence, the Belize Bank decided that it take the facility and have a loan with UHS for $17 million and the DFC then reduced its loan portion to $12.38 million."
And while DFC guaranteed the hospital for almost $30 million, Commissioner Bailey-Martinez noted that the collateral was insufficient.
Merlene Bailey-Martinez,
"Fives acres with standard fill to a depth of five feet, five acres at five hundred thousand dollars per acre is valued at $2.5 million and that was the valuation I was interested in because the
project document lists that valuation at $9 million and at $9.5 million and it was on the basis of that, that the loan was on approved; on the basis of that valuation. So they valued five acres at $2.5 million and a subsequent two acres at $1.7 million which, if my math serves me correct, total valuation of the land would be at $4.2 million and of course not having been appraised by DFC.
Equipment per invoices at $10 million, main building at $7.4 million, utility and services buil10ding at $166,600 for a total value, real market value, and there is a distinction between how much money was actually spent in this structure as opposed to its market value--market value at $22,753,400. You are saying DFC is exposed to the tune of $12 million plus $17 million which is $29 million and that is a difference of about $7 million."
Franklin Malgoire,
"Yea but you also need to realize that this is only one of the properties valued. Remember I said we had twelve valuations, so we have to add up all of those aggregate."
Merlene Bailey-Martinez,
"Am I to take it that DFC has proper legal documents, that these properties were signed over to DFC as part of the collateral? Are those perfected?"
Franklin Malgoire,
"There is recorded, at the Registry, a second mortgage on all of those properties. That is where the two hundred and five thousand dollars in legal fees, recording fees, etc. were paid. In the same package that I gave you, there is a legal certification form there that is signed by the legal department to indicate that the legal instruments have been perfected. It is a one page document. It is second mortgage, Belize Bank holds the first."
Merlene Bailey-Martinez,
"So DFC guaranteed the $17 million at Belize Bank, a loan to UHS, Universal Health Services, and also, in terms of their ability to collect from those twelve properties, it is a second mortgage, so Belize Bank also holds the first lien on those properties."
Franklin Malgoire,
"That is correct."
Merlene Bailey-Martinez,
"Where on earth does that leave the DFC in terms of its ability to move on those properties?"
Franklin Malgoire,
"Local parlance: up the creek."
Far up that proverbial creek because, according to earlier testimony, presently, the Universal debt is non-performing.
