Billionaire investor Michael Lee Chin on Thursday put a new proposal on the table to AIC Barbados bondholders, asking for another two years to pay off debt on overdue notes, promising returns of 12 per cent.

His Jamaican creditors, however, have counter-proposed 13.25 per cent.

Lee Chin has now missed three deadlines to pay down a combined US$42 million of principal debt, maturing at different points throughout the year, and was back to report to bondholders in Kingston, having so far failed to secure a deal for his 20 per cent stake in cable company Columbus Communications that was meant to finance the repayment of the bonds issued six years ago.

"We have been most transparent in our dealings," said Lee Chin, as he laid out the new proposal.

"I apologise to noteholders. I'm sorry to put you through any inconvenience, but the Columbus sale did not come to fruition."

At the three-hour meeting at the Terra Nova All Suite Hotel, Lee Chin told his creditors he has come into some cash from dividends paid out by National Commercial Bank (NCB) Jamaica Limited, as well as his unspecified share of proceeds of a five-year US$450-million bond issued by Columbus International - parent company to Columbus Communications - at 11.5 per cent due to mature November 20, 2014.

In a new appeal to bondholders, the investor, whose AIC Caribbean Fund has just plunked down US$35 million for a piece of a condominium complex in Dominican Republic, said he could pay down 30 per cent of the US$155 million AIC Barbados bond debt by today, December 4, approximately US$46.5 million (J$4.2 billion), at a proposed rate of 12 per cent.

Jamaican investors hold US$108 million of the bonds.

The other 70 per cent, he said, would be redeemed by December 4, 2011, at the same 12 per cent rate, reflecting a premium on the remaining six US dollar-denominated bonds whose original coupons are 8.94 per cent, 9.0 per cent and 12 per cent.

The JMD issues would be repaid at 21 per cent, though the original prices are 22 per cent and 30.68 per cent.

But Lee Chin also said that, if a bank loan that he was negotiating came through, he would redeem as much as 50 per cent of the debt by yearend.

He, however, slapped down a proposal that he pledge his newly acquired shareholdings in Manulife as further backing for the debt.

"We are standing by our liabilities, and this is the best offer we can make today," Lee Chin said.

Extract more returns

Bondholders at the Terra Nova meeting signalled acceptance of the two-year timeline and suggested December 9 for the first 30 per cent and a 35 per cent split in 2010 and 2011.

But they are also seeking to extract a more attractive return, saying they would accept nothing less than the 13.25 per cent that was agreed to for interest payments at another meeting mid-year, but which, at the time, was applicable only to past-due bonds that were to be paid off at the last extended deadline of November 27.

There was no vote on their proposals to trustee Pan Caribbean Financial Services. Instead, Pan Caribbean took note of all suggestions and said it would issue a new resolution by Monday, reflective of the direction creditors wanted to go.

In default on the debt

Lee Chin has limited room to manoeuvre in these negotiations. If he plays hardball, he stands to lose up to half his remaining 62 per cent interest in the ultra-profitable NCB, from the 877 million shares pledged as collateral for the bonds.

He has repledged NCB shares equivalent to twice the size of the remaining debt as security.

Pan Caribbean's Donovan Perkins acknowledged that the missed November 27 extended deadline meant that AIC Barbados was in default on the debt.

"As trustees, we are disappointed with AIC Barbados for not honouring its obligations," Perkins said.

But when asked by a bondholder to force the sale of the pledged assets, he reiterated earlier advice that to do so would likely result in a dilution of the value.

NCB shares are now trading at below $15, reflecting coverage of $12.7 billion (US$142.6 million).

Perkins said Pan Caribbean would now seek to place limitations on AIC Barbados taking on new debt, and would be insisting that bondholders have first call on any proceeds from new asset sales.

Pan Caribbean is expected to distribute a new resolution by Monday to bondholders, incor-porating the 13.25 per cent proposal and the acceptable timeline, as well as a date to vote on the resolution.

sabrina.gordon@gleanerjm.com