BY-PASSED

A low-cost loan arrangement that opens the door for the lender to acquire 20 per cent of Banks Holdings Limited (BHL) has run into early criticism.BHL’s move to avoid high interest borrowing in the building of a $50 million state-of-the-art brewery at Newton, Christ Church, was announced to shareholders in a circular earlier this week.But yesterday, Doug Skeete, president of the Barbados Association of Corporate Shareholders, said the way BHL went about the deal without involving small shareholders was “unconscionable”.He queried why the island’s biggest beverage conglomerate did not ask shareholders if they would support a rights issue to raise the necessary capital before going into a convertible debt option. BHL has said: “Through this option, the financing entity will forward US$28 million in cash to BHL at low interest rates. “In exchange, they will have the option to convert any or all of the debt into shares in BHL at BDS$4 per share.“We will utilise the US$3 million excess to cover working capital support during the initial months of the new operation,” stated the letter signed by chairman Sir Allan Fields and managing director and chief executive officer Richard Cozier.“After substantial financial scrutiny it was determined that the debt options proposed by leading local, regional and international financial institutions would impose severe debt service requirements from the start-up of the plant,” the letter stated.The board felt the resulting strain on projected cash flows would significantly compromise their ability to participate in any attractive mergers or acquisitions that might materialise in that time.It was also noted that the board looked at straight equity financing but considered that, given the economic climate, there might be challenges in the raising the full capital required.The contract with Krones AG, one of the world’s most reputable suppliers to the brewing industry, was executed in February 2010 and requires them to manufacture, instal and commission the brewery. (NB)