First Citizens Bank

Million-dollar loan: First Citizens Bank Ltd’s head office at Queen’s Park East in Port of Spain.

MAJORITY State-owned financial institution, First Citizens Bank Ltd (FCB) is one of three financial institutions that is listed as having provided long-term loans to Cornerstone Financial Holdings Ltd, according to the Jamaican investment holding company’s draft financial statement for the year ended September 30, 2020.

The draft document indicates that FCB provided a long-term loan of US$25 million ($170 million) to Cornerstone Financial, which is the majority shareholder and parent of Barita Investments Ltd.

Cornerstone Financial also reported in its financials for its year ended September 30, 2020, that JMMB Bank (Jamaica) Ltd and Jamaica National Bank Ltd provided it with loans of US$5.6 million and US$4.2 million, respectively.

Cornerstone Financial also received US$47.7 million from corporate bond holders between October 1, 2019 and September 30, 2020. In total, Cornerstone Financial received US$81 million in long-term loans for the period.

Cornerstone Financial owns about 75 per cent of Barita Investments. Cornerstone’s 2019 audited financials indicate that the company had assets of US$414.8 million for the year ended September 30, 2019. Ninety-six per cent of Cornerstone’s assets at the end of September 2019, some US$399.7 million, were shares in Barita Investments. On Friday, Cornerstone’s investment in Barita Investment was worth US$496.9 million.

On Friday afternoon, the Sunday Express e-mailed a list of nine questions to FCB chairman, Anthony Isidore Smart, the bank’s CEO, Karen Darbasie and its corporate secretary, Lindi Ballah-Tull. Yesterday morning, Smart confirmed receiving the questions but he had no other comment to make.

The questions were:

1) When was the US$25 million loan disbursed?

2) Why did FCB lend Cornerstone US$25 million

3) The loan is described as long term. What is the term of the loan?

4) What is the interest rate of the loan?

5) Is the loan amortising or a bullet?

6) What is the value of the collateral that FCB required for the US$25 million loan?

7) Is the loan secured or unsecured?

8) If secured, what percentage of the collateral that is being held in Barita Investment shares?

9) How would you now characterize the relationship with Barita Investment Ltd, given the revelation last Sunday of the partnership to provide services for the cross-listing of Massy shares and now the loan.

Developing relationship

Last year, publicly listed FCB developed a relationship with the privately held Cornerstone Financial Holdings group when it made two investments in Barita Investments Ltd, the brokerage house that is listed on the Jamaica Stock Exchange.

FCB’s wholly owned subsidiary, First Citizens Investment Services, made an initial investment in Barita Investments in September 2020 at the Jamaican company’s Additional Public Offering (APO) of shares.

FCIS acquired 54,280,154 shares in the Barita Investments APO, paying J$52 a share, for a total consideration of about J$2.82 billion (US$19.5 million).

That initial investment gave FCIS a 5.0 per cent stake in the Jamaican company, which made it the second largest investor in Barita, after Cornerstone Financial Holdings, which then owned about 74 per cent.

Following its initial investment in Barita in September 2020, FCIS acquired a second block of 12 million shares in Barita, taking its shareholding to 66,280,154 shares, or 6.1 per cent of the Jamaican company.

FCIS acquired the second block of Barita shares on December 4, 2020, at a price of J$90 a share for a total consideration of approximately J$1.08 billion (US$7.2 million).

FCIS is estimated to have paid a total of US$26.7 million for the 6.1 per cent stake in Barita. The FCIS stake was worth an estimated US$40 million on Friday.

Addressing shareholders at the banks virtual annual meeting on June 30, 2021, FCB CEO, Karen Darbasie, said the bank has “actually recorded a very good capital gain” on its investments in Barita Investment Ltd, a publicly listed Jamaican financial services company.

“We continue to look for more investments, but they (Barita) are investments that were done in the normal course of business to capitalise on potential for gains and or returns so that we could continue to deliver the positive growth in our profits for all of our shareholders,” said Darbasie, at the company’s virtual annual meeting.

And then last week, the Sunday Express reported Massy Holdings president, Gervase Warner, as confirming that the board of the group had chosen a joint bid of FCIS and Barita to advise Massy on its cross-listing on the JSE in January.

“We ran a rigorous and objective evaluation process, inviting advisers from both markets, and that partnership was selected,” said Warner. He said Massy sent out invitations to all of the ‘appropriate players’ in Jamaica and T& T. A total of 13 companies were invited to bid.

Massy received six expressions of interest, which it narrowed down to a short list of three that were required to submit full proposals. The Massy board selected FCIS/Barita Investments at its meeting on August 8.

Barita Finance

independent

On Friday, Cornerstone Financial broke its silence on issues raised by the Trinidad Express Newspapers since the end of April when it sent written responses to questions to the two Jamaican newspapers.

The Express had reported that companies called Barita Finance and 294 Inc, which is connected to Cornerstone founder, Paul Simpson, were both incorporated as offshore companies in St Lucia on November 28, 2018.

Responding specifically to the link between Barita Finance and the Cornerstone entities, its chief investment officer Jason Chambers wrote: “Barita Finance Ltd is a special purpose vehicle whose shareholdings and directorship are totally independent of and external to Barita Investments Ltd, the Cornerstone entities, and any of its directors.

“Barita Investments Ltd is the investment manager of Barita Finance Ltd and acts as fiscal agent as it relates to debt issuances by Barita Finance. This represents the narrow and sole nature of the relationship between Barita Finance, Barita Investments, the Cornerstone Group, and any of its management, shareholders, directors and their connected parties, including the companies they own.

“Functionally, Barita Finance is a vehicle used to provide investors of Barita Investments with exposure to various marketable securities which form part of the suite of off-book investment structured products offered to the market.”

Cornerstone migrated from St Lucia to Barbados under a Certificate of Continuance under section 356.2 (1) of the Companies Act of Barbados and its name changed to Cornerstone Financial Holdings Ltd on February 26,2020. The company was previously Cornerstone Investments Holdings Ltd.

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