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Neal & Massy sale of Shell Jamaica asset 'very close'

Published:Friday | October 7, 2011 | 12:00 AM
Shell gas station on Constant Spring Road, Kingston. - File photos

Lavern Clarke, Business Editor

Neal and Massy is "very close" to finalising the sale of its 40 per cent stake in Cool Petroleum to an American company, says the conglomerate's Jamaican representative Brian Young, who suggested Tuesday that the deal could be sealed in a matter of weeks.

Young identified the potential buyer only as a family-owned American company.

The only thing left, he said, was for the buyer to complete its due diligence on Cool Petroleum, which Neal and Massy owns in partnership with Joseph 'Joey' Issa.

Neal and Massy Holdings partnered with Issa in late 2005 to acquire the domestic assets comprising 56 retail gas stations and chemical assets of marketing company Shell West Indies, which was pulling out of the Jamaica.

But the Trinidad-based conglomerate last year wrote off the investment after booking combined losses of TT$19 million on Cool over 2009 and 2010.

Young heads Cool's board, but Issa runs the operation with the help of CEO Rodney Davis, who managed telecoms LIME before he became a gas executive.

Neal and Massy declined to say then whether it would exit the joint-venture partnership, but this week Young, who is also chairman of Neal and Massy Group Jamaica Limited, said the sale of the holdings was imminent and could happen by the time he got back from vacation.

Young, who has about 46 years of corporate wheeling and dealing under his belt, declined comment on the value placed on the 40 per cent stake.

Cool Petroleum Limited, a wholly owned subsidiary of St Lucia, registered Cool Petroleum Holdings Limited, recorded fixed assets of J$15.8 billion on its balance sheet at yearend September 2010, according to the company's audited accounts obtained through the Companies Office of Jamaica. Shareholder equity amounts to J$8 billion, 40 per cent of which is J$3.2 billion.

Well-placed sources have said the American buyer is interested in a dominant stake in Cool, which would require Issa being willing to give up some of his shareholdings.

"There are discussions along that line," Young confirmed, but said any details would have to come from Issa.

Reached Wednesday, Issa said he would not comment on the deal so as not to derail what he described as a delicate transaction bound by confidentiality.

The September accounts value Cool as a J$28-billion company by revenue - income large enough to produce an operating surplus, but with margins too thin to comfortably service its large debts.

In 2009, Cool lost close to half a billion dollars on a J$2.3-billion debt-servicing bill; last year, it did substantially better with net loss minimised to J$15 million.

Cool's spending power was stable over 2009 and 2010 with operating cash of about J$1.7b at the close of each fiscal period.

Some J$833 million of accumulated deficits weigh on the gas company's balance sheet at September 2010. And Cool also reported long-term debt of J$5 billion to bondholders amid total debt of J$10 billion, the equivalent US$119.8 million of which was disclosed on its 2010 annual returns filed in January.

Land assets with carrying value of J$8.5 billion have been pledged as security for the debt.

Cool is in the business of marketing and selling petroleum products. It operates the largest network of gas stations in Jamaica under the Shell brand.

Cool's directors at last disclosure comprised Jamaicans Young, Issa, and Peter Graham, Trinidadians Christian Maingot and Linford Carrabon, Englishman Colin Hendrick, and American Gwen Kennedy.

lavern.clarke@gleanerjm.com