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Cash Plus broke!
Entity appeared to pay lenders mainly from loans
CAMILIO THAME, Business co-ordinator
thamec@jamaicaobserver.com
Tuesday, May 20, 2008
CASH Plus Limited (CPL) only had J$3 million in cash at the end of March this year, according to the receivers of the company, and based on its assets, which was estimated at J$4 billion at March-end, will only be able to pay a maximum of 16 cents on every dollar owed to its creditors.
The state of the failed scheme was revealed yesterday in a report issued by the co-interim receiver/managers of CPL and its subsidiaries, which showed that lenders were paid interest and principal payments from monies they had loaned the entity.
The receivers, which include Kevin Bandoian of local accounting firm PricewaterhouseCoopers, said that the "monies used for repayment appear to have come directly from the funds received from lenders, as Cash Plus did not appear to have sufficient income-generating activities to support the interest payments on these deposits and to pay staff and other operating costs."
CPL used "70 per cent of its intake, on an overall basis, to repay lenders" presently estimated to be between 35,000 and 45,000 individuals.
Of the 200 affiliates of Cash Plus identified by the receivers only three were deemed to be "viable entities".
During 2004 to 2007 CPL received funds from lenders totalling approximately J$22 billion, but the amounts paid out mostly represented interest payments as the group still had J$20.6 billion in "loans received" on its books at the end of March this year.
This means that only J$1.4 billion of the principal on the loans were repaid to individuals who managed to withdraw their entire investment in the scheme before it failed.
The flow of funds coming into Cash Plus would have accommodated interest payments over the years despite the combined entities being unable to generate sufficient revenues because each year the loans received far exceeded the previous year's collection.
The collections made in 2007 totalled J$18 billion, nearly six times more than the J$3 billion plus lenders pumped into the group in 2006, which was far more than the amounts received up to then.
Outside of using the loans to repay lenders, there were several instances, according to the receivers, when Cash Plus entered into transactions to acquire companies, real estate and other tangible assets, which last year was advertised by Cash Plus to include the Hilton Hotel and hardware company, Mainland International.
The receivers have assessed that CPL has J$1.17 billion in refundable deposits on some of these failed transactions and another J$2.87 billion tied up in non-liquid assets, which include land and buildings.
The receivership team cautioned, however, that the assets totalling J$4 billion were not easily converted and the final amounts realised may be different from what was shown, "as they are subject to prevailing market conditions and the receivership team's ability to negotiate with vendors of the failed transactions".
Cash and other liquid assets amounted to less than J$3 million as at March 31, 2008.
The liabilities of CPL and its affiliates on the other hand totalled J$24.9 billion, which means that the maximum amount of money lenders will be able to get back is 16 per cent, or 16 cents out of every dollar they are owed by Cash Plus.
"Bearing in mind that there is no liquidity in the group, the repayment to lenders and other creditors can only commence after Cash Plus has realised a substantial portion of real estate and deposits on failed transitions," added the report. The Supreme Court will decide on the next appropriate course of action.
On March 30, Justice McIntosh approved the appointment of Kevin Bandoian as joint receiver/manager along with another classified party to manage the affairs of the beleaguered Cash Plus.
The joint receiver/managers were given 35 days to supply the court with a report on Cash Plus' status.
Following a police raid on the Norbrook Drive home of the Cash Plus Chairman Carlos Hill last month, several documents were seized, some of which suggested that billions of dollars in several overseas financial institutions have been linked to Hill and Cash Plus.
Entity appeared to pay lenders mainly from loans
CAMILIO THAME, Business co-ordinator
thamec@jamaicaobserver.com
Tuesday, May 20, 2008
CASH Plus Limited (CPL) only had J$3 million in cash at the end of March this year, according to the receivers of the company, and based on its assets, which was estimated at J$4 billion at March-end, will only be able to pay a maximum of 16 cents on every dollar owed to its creditors.
The state of the failed scheme was revealed yesterday in a report issued by the co-interim receiver/managers of CPL and its subsidiaries, which showed that lenders were paid interest and principal payments from monies they had loaned the entity.
The receivers, which include Kevin Bandoian of local accounting firm PricewaterhouseCoopers, said that the "monies used for repayment appear to have come directly from the funds received from lenders, as Cash Plus did not appear to have sufficient income-generating activities to support the interest payments on these deposits and to pay staff and other operating costs."
CPL used "70 per cent of its intake, on an overall basis, to repay lenders" presently estimated to be between 35,000 and 45,000 individuals.
Of the 200 affiliates of Cash Plus identified by the receivers only three were deemed to be "viable entities".
During 2004 to 2007 CPL received funds from lenders totalling approximately J$22 billion, but the amounts paid out mostly represented interest payments as the group still had J$20.6 billion in "loans received" on its books at the end of March this year.
This means that only J$1.4 billion of the principal on the loans were repaid to individuals who managed to withdraw their entire investment in the scheme before it failed.
The flow of funds coming into Cash Plus would have accommodated interest payments over the years despite the combined entities being unable to generate sufficient revenues because each year the loans received far exceeded the previous year's collection.
The collections made in 2007 totalled J$18 billion, nearly six times more than the J$3 billion plus lenders pumped into the group in 2006, which was far more than the amounts received up to then.
Outside of using the loans to repay lenders, there were several instances, according to the receivers, when Cash Plus entered into transactions to acquire companies, real estate and other tangible assets, which last year was advertised by Cash Plus to include the Hilton Hotel and hardware company, Mainland International.
The receivers have assessed that CPL has J$1.17 billion in refundable deposits on some of these failed transactions and another J$2.87 billion tied up in non-liquid assets, which include land and buildings.
The receivership team cautioned, however, that the assets totalling J$4 billion were not easily converted and the final amounts realised may be different from what was shown, "as they are subject to prevailing market conditions and the receivership team's ability to negotiate with vendors of the failed transactions".
Cash and other liquid assets amounted to less than J$3 million as at March 31, 2008.
The liabilities of CPL and its affiliates on the other hand totalled J$24.9 billion, which means that the maximum amount of money lenders will be able to get back is 16 per cent, or 16 cents out of every dollar they are owed by Cash Plus.
"Bearing in mind that there is no liquidity in the group, the repayment to lenders and other creditors can only commence after Cash Plus has realised a substantial portion of real estate and deposits on failed transitions," added the report. The Supreme Court will decide on the next appropriate course of action.
On March 30, Justice McIntosh approved the appointment of Kevin Bandoian as joint receiver/manager along with another classified party to manage the affairs of the beleaguered Cash Plus.
The joint receiver/managers were given 35 days to supply the court with a report on Cash Plus' status.
Following a police raid on the Norbrook Drive home of the Cash Plus Chairman Carlos Hill last month, several documents were seized, some of which suggested that billions of dollars in several overseas financial institutions have been linked to Hill and Cash Plus.
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