Ainsley Walters, Staff Reporter
( L - R ) RICHARD LAKE and RICHARD AZAN
RICHARD LAKE, head of The Horsemen Limited, plans to seek the intervention of the Contractor General in the proposed privatisation of Caymanas Park, the island's lone racetrack.
An evaluation committee, appointed by the National Investment Bank of Jamaica (NIBJ), had last year named the Richard Azan-led Caymanas Entertainment limited (CEL) as the preferred bidder for the privatisation of the track, ahead of Horsemen Limited, to enter negotiations for the billion-dollar redevelopment of Caymanas Park as an entertainment and gaming facility alongside horseracing.
A late January 2006 correspondence to the Ministry of Finance from the NIBJ, analysing CEL's bid, stated that a 'possible' cash injection of $202.75 million in the company was 'substantially' below that which was expected as equity.
Lake, a former director of Caymanas Track Limited (CTL), the government entity, which runs Caymanas Park, wrote the NIBJ on March 15, pointing out that since CEL had failed to meet the requirements of the bid in several areas, The Horsemen Limited should be invited to enter negotiations, and if not, he would have no alternative but to refer the matter to the Contractor General.
The Horsemen Limited, along with CEL, had both achieved the qualifying mark but Azan's group, which boasted a two-phased $3.1 billion bid, had scored higher.
"By all accounts, the negotiations between the NIBJ and the Azan/Supreme Ventures consortium for the rights to lease and develop Caymanas Park have broken down," Lake's letter stated.
STALLED NEGOTIATIONS
"Given the fact that negotiations have stalled and the fact that The Horsemen is the only other bidder declared qualified to lease and develop Caymanas Park, The Horsemen Limited would have expected to be called upon to enter negotiations with the NIBJ."
However, no such invitation has been forthcoming from the NIBJ.
"When I call all I am told is they're awaiting instructions from the Minister of Finance," Lake said recently.
Azan, a top trainer and record champion owner at Caymanas Park, lists lottery giant Supreme Ventures Limited (SVL) as a 25 per cent shareholder in CEL's bid.
Other partners include himself and Peter Asher, each with 10 per cent stakes, Wilmington Corporation with 25 per cent, Ground Floor Investors 20 per cent and 10 per cent to the Government of Jamaica in the form of a Racing Industry Stakeholders Share Ownership Plan (RIS-SOP).
Analysing CEL's bid, the NIBJ correspondence, dated January 30, 2006, summarised in part: "The lower than expected cash injection and the non-tangible equity inputs from other investors reduce considerably the strength of the equity base of CEL."
The NIBJ found that CEL's bid, which had committed to inject J$527m in equity, for the first of two phases, had come up short by more than half the amount. The facts "suggest that less than half the amount can be identified as coming in cash," the report stated in summarising CEL's proposal, which had an equal amount of J$527m, for the first phase, listed as debt financing from two prominent local financial institutions.
"The only cash that can be really identified from the submissions made to us is the $131.75 million by Supreme Ventures Limited and an amount of $71 million from Alston Stewart and his wholly owned company Wilmington Corporation Limited," the NIBJ summary added.
However, the report cast doubt on Wilmington Corporation/Alston Stewart's $71 million, describing the sum as a "charitable number" because "it is all the cash that is available in the numbers presented to us for use by Mr. Stewart in his company and for his personal requirements".
Given that the expenses of the company will have to continue to be met and the personal needs of Mr. Stewart will have to be funded, "it is probably unreasonable to assume that the entire cash available to him and from his company and his personal holdings will be used as cash injection in CEL," the report summed up.
The NIBJ's summary supported Lake's claims that very little money is being put up by CEL as Azan and Asher's investments, $52.7 million each, would be sweat equity whereas the remainder of Stewart's commitment, US$1.2 million (J$72 million) would represent "project management services".
In addition, the NIBJ report said no certain source for Ground Floor Investors' $105.4 million was provided and SVL's undersubscribed public offering was also cause for concern as the lottery company's $131.75 million would make it the most important shareholder and most important mover behind the CEL project.
In light of the NIBJ's report, Lake, who said The Horsemen's bid amounted to $1.295 billion with equity of $215 million, $115 million in cash and a $100m stand-by facility from a local financial institution, questioned the evaluation committee's decision to name CEL as preferred bidder.
"It's obvious no money is being put in by these people," Lake said, pointing out that The Horsemen's partners, holding equity of J$769m with another J$776m as debt financing, would each be held to performance bonds bearing 10 per cent penalties.
Lake, who chaired CTL's finance committee from 1989 until 2001 when the company recorded record growth in all areas, through the acquisition of a modern betting system and establishment of scores of Off-Track Betting Parlours (OTBs) across the island, also criticised CEL's model of planning to place 750-1000 slot machines/video lottery terminals at Caymanas Park.
According to Lake, SVL, who would be responsible for the gaming arm of CEL, showed a significant loss in their slot machine operations last year.
An SVL private placement in July had projected, for the year ending October 2005, revenues of $369.1 million from slot machines.
Lake said his bid also catered to slot machines but wasn't relying on gaming terminals to be the The Horsemen's main source of income.
He pointed to a partnership with Autotote (Scientific Games Racing) to improve the quality and standards of OTBs, establishment of a North American betting pool for Caymanas Park as well as a racing channel to broadcast local racing internationally with telephone betting and account wagering being a new target market.
