After many years of trumpeting the fact that its flagship company Banks Breweries was built by the savings and risks taken by ordinary Barbadian workers, many of them Banks employees, BHL scheduled its extraordinary general meeting for a weekday morning at 10 o’clock, a most inconvenient time for most working people, and away from the company’s various factories and offices, where many of said shareholders still work every day.
At the meeting last Monday, after protests from many learned shareholders, including Dr Frank Alleyne, attorney Pearson Lovell, accountant Douglas Skeete, Goddard Enterprises CEO Martin Pritchard, Roger Cave of Fortress, former BBC CEO Martyn King, UWI lecturer Walter Blackman and shop owner Sharon Inniss, a vote by show of hands was not allowed.
I wonder why. Instead, the meeting went straight to a poll vote, which means you vote your shares, so no shareholder had the chance to officially have their vote recorded.
The resolution to not allow any more vote dilution after allowing the incoming shareholder to do so to everyone else’s shares was therefore carried by a huge majority of votes, not shareholders.
And that’s how BHL closed the barn door on share dilution, after letting the horse escape one last time.
But back in June 2010, in announcing to shareholders it was issuing new shares to Latin Capital Fund I, LP via its subsidiary SLU Beverages Ltd, Banks Holdings Ltd agreed that dilution was a pertinent issue.
In its June 30, 2010 letter to shareholders, it pointed out that “there is the potential for the note holder to acquire just over 20 per cent of Banks Holdings (if the full debt is converted). This will result in a dilution in shareholders’ percentage holdings by that percentage . . .”.
However, continued the letter, after discussing the matter “with our major shareholders” – who were not named – they “endorsed the plan to proceed with this method of financing”.
And, in fact, said the letter, by the date of the circular (June 30) the board had “received written authority” to convert US$26.5 million in shares of the total convertible debt of US$28 million, into 13.25 million shares in BHL.
Thus, BHL acted in a way that diluted the shares of every other shareholder in the group without the knowledge or approval of the vast majority of shareholders. By its own admission.
The BHL letter of December 13, 2010, which called the EGM and was also signed by chairman Sir Allan Fields and CEO Richard Cozier, admitted to shareholders that “an integral part of financing models such as this is the need to protect all shareholders from future dilutions of their holdings and such a clause is included in our agreement”.
With no hint that it understood the irony of the situation, the company said the EGM was being “convened specifically” because “we have been advised that shareholder consent for restrictions on future utilisation of shares as a financing option should be obtained”. You bet.
The letter on June 30 contained a lot of smoke about the note holder having ten years in which to “exercise any conversion and must notify BHL at least six months prior to the end of the ten-year term if they do not intend to convert”, thus allowing the company to “explore options to facilitate the balloon payment”.
But five days before this letter was sent out, BHL had already converted 94.6 per cent of the Latin Capital loan to shares. And there you have it: share dilution, BHL-style.
Patrick Hoyos is a long-standing journalist and publisher of the Broad Street Journal.
