US$194m FINSAC haul - 47% of US$366m debt outstanding

McPherse Thompson, Associate Editor - Business

JamaicaN Redevelopment Foundation Inc (JRF) has recovered a little more than half of the bad debts it was sold by the Financial Sector Adjustment Company (FINSAC) almost a decade ago, but says there is almost another J$15 billion left to be collected, most of which may have to be written off.

The current haul on the non-performing loan portfolio, which was a legacy of the financial sector meltdown in the 1990s, was disclosed Tuesday as the FINSAC Commission of Enquiry resumed hearings in New Kingston after a week's break.

JRF valued collections from debtors at US$194 million to date, which amounts to 53 per cent of the estimated debt.

Jason Rudd, chief executive officer of the JRF, said the debt collection agency still has 4,434 open accounts on its books representing debts of US$172 million still to be recovered - valuing the full portfolio at US$366 million.

The outstanding amounts convert to J$14.8 billion at current spot market prices.

Rudd said 1,648 of the accounts were active, representing indebtedness on principal of US$145 million. But the JRF boss told the FINSAC commission that the majority of the outstanding debts were uncollectable.

As at January 31, 2011, the JRF, which bought the non-performing loan portfolio from the Jamaican government through FINSAC and its related entities at the end of January 2002, collected US$194 million, said Rudd.

1,700 accounts resolved

In 2003, the JRF on-sold more than 16,000 of the loans, representing mostly credit cards and overdraft accounts, to another local debt-recovery company, International Asset Services.

JRF retained a portfolio of 4,434 accounts on its books. Rudd told commission chairman Worrick Bogle and commissioner Charles Ross that 1,700 of the accounts have so far been resolved.

JRF's records, he said, showed that only 88 persons took advantage of what has been termed a "window of opportunity" offered by JRF in the initial stages of the debt collection process to negotiate a restructuring of their debts to a manageable payment schedule.

Asked if interest continued to be accrued on the outstanding amounts, Rudd said "we would not have purchased the debt if that was not allowed".

Under the agreement, what was sold to the JRF included the aggregate amount in respect of principal, interest, insurance premiums, fees, charges, costs, damages and any other sums of whatever nature owing from time to time by the relevant borrower or any security party such as a guarantor, together with credit and security documents.

Asked by Bogle how much longer JRF would be continuing the collection process, the witness said he could not reasonably estimate that period. "It's impossible to say," he said.

Rudd said that in order to avoid a predatory lending environment such as the imposition of high interest rates as existed during the financial meltdown of the 1990s, the government, through partnership with the financial sector, including the JRF, need to do a better job of educating borrowers, ensuring that they are aware of the risks involved.

"JRF is committed to working with the government of Jamaica to do its part and to be part of the solution moving forward," said Rudd under cross-examination by attorney Anthony Levy.

Levy is representing FINSAC debtors Jean-Marie Desulme, former chief executive officer of Thermo Plastics and its subsidiary Plas Pak, and Don Crawford, former chairman of Century National Bank, among others.†

The commission chairman, who said the commission was trying to complete the public hearing of the enquiry by mid-July, has indicated that the quasi-judicial tribunal would not accede to Levy's requests to call Dr Gladstone Bonnick, the first chairman of FINSAC, and Dennis Boothe, a former chief executive officer to testify at the hearing.

He said they believed no useful purpose would be served given that Dr Omar Davies, former minister of finance, and a representative of the Bank of Jamaica, among others, had already testified to issues that would be covered by those potential witnesses.

Bogle said they would be seeking to call Dr Karl Blythe, former minister of water and housing, who himself is a FINSAC debtor.

However, attorney Sandra Minott-Phillips, who along with attorney Gavin Goffe are appearing for the JRF, questioned the relevance of calling Blythe. Bogle said they would reconsider the issues and make a determination about whether or not to call Blythe when the hearing resumes on July 4.

mcpherse.thompson@gleanerjm.com