The Development Bank of Jamaica (DBJ) has revealed that though it decided in October 2013 to write off a $76.4-million investment in the Orange Valley Holdings (OVH)-run Outameni Experience attraction, it would still be able to collect what is due if the debt-ridden company rebounds.
That debt, the DBJ said, amounted to more than $200 million at the time.
In a statement yesterday, DBJ Chairman Joseph M. Matalon outlined that, arising from the merger of the DBJ and National Investment Bank of Jamaica (NIBJ), as at September 30, 2006, the DBJ assumed ownership of the outstanding preference shares from a US$500,000 investment made in March of the previous year.
"The preference shares have not been cancelled, enabling the DBJ to collect in the event there is a turnaround in the fortunes of the company," Matalon said in response to suggestions in the public sphere that the DBJ had provided the first of two government bailouts to the operators of Outameni.
Matalon, in outlining the DBJ's association with Outameni, said yesterday that OVH approached the NIBJ in January 2005 for an equity investment of US$500,000 to assist with the construction of a heritage tourism attraction/theme park at Orange Grove, Trelawny, to be named Outameni Theme Park.
"In accordance with the then mandate of the NIBJ to provide equity capital to viable projects, and in keeping with its focus on the development of tourism-related projects, the NIBJ, at its board of directors' meeting on March 31, 2005, approved an investment of US$500,000," Matalon said.
The investment was for a period of five years with fixed dividend payments of eight per cent, payable annually.
However, six years later, the DBJ board took a decision to make full provision against the investment, by charging the profit-and-loss account of the bank and reducing the carrying value of the asset in its balance sheet.
"It should be noted that this provision was made at a point in time long before the National Housing Trust (NHT) transaction was consummated or even contemplated," Matalon said, in separating the DBJ from the ongoing controversy surrounding the Trust's $180-million purchase of the property.
"The board's decision to make full provision for the preference shares was based on the fact that the investment was impaired, the bank not having received any preference dividends or redemptions since inception of the project, and the project itself having recorded losses in each year of operation since inception."
Matalon said the DBJ decision was prudent and in keeping with international financial reporting standards, and that the bank's external auditors subsequently reviewed and accepted the move.
He said the potential purchase of OVH by the NHT was discussed during a meeting of the DBJ board on December 20, 2012, and, based on a request from the NHT, a letter of no objection to the transfer of lands, free and clear from any liens of the NIBJ/DBJ, should the NHT decide to proceed with a purchase of the property.
"Matalon noted that, in October 2013, the DBJ board took a further decision to write off the investment in OVH altogether on the basis of the fact that, among other things, OVH owed secured lenders to the project J$209 million, with interest continuing to accrue and increasing the outstanding secured balances over time.
The DBJ had also recognised that, in any future liquidation of the OVH, the bank's preference shares would rank behind the secured lenders and all other creditors, in the order of priority of distribution to shareholders and creditors.
"Given the foregoing facts, it was clear to the board that the chance of any recovery of the investment was extremely remote and therefore justified the write-off of the asset," Matalon said.