Analysts say declining economy reason for Banks DIH putting up assets for loan

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…from competing Bank

Banks DIH Limited
Banks DIH Limited, the Guyana based brewery giant has put up a number of its properties and brewery equipment as collateral in order to secure a loan debenture from a competing bank as opposed to the bank which it is a majority owner of.
This is mere months after Chairman Clifford Reis, announced a reduction in the company’s loan portfolio and a major buy back of shares looking to retake control of the Barbados operations.
The move has raised eyebrows among financial analysts, some of whom point to the declining state of affairs of the Guyana economy and to the fact that the debenture/loan is being secured at Republic Bank Guyana, while Banks DIH is the majority owner of the Citizens Bank.
According to information published in the Official Gazette, Banks DIH Limited has put up as collateral, its Industrial Estate in Plantation Ruimveldt South; its Wortmanville property and another located at Plantation Adventure, in the Riverstown-Annandale, along with almost one dozen storage tanks and other pieces of infrastructural assets.
Financial analysts weighing in on the transaction have since opined that while this is a standard practice in business for organizations to have to put up collateral for new loans, the fact that the loan is not being secured from Citizen’s Bank—which it owns—begs the question as to why, given recent statements by Chairman of the Board of Director, Clifford Reis about the health of the company.
The company recently held its Annual General Meeting (AGM) for 2016, where Reis reported that Banks DIH’s debt portfolio had actually gone down for the financial year ending September 30.
“What could have happened in the last six months for them to go to the market to borrow new debt?” questioned one analyst.
It was pointed out that Reis in providing an update on the financial health of Banks DIH Limited, pointed to the large scale buy back of shares from the Barbadian based Caribbean subsidiary.
The Company in December last repurchased 150,138,464 of its ordinary shares, representing 15 per cent of the issued share capital, from the Barbadian brewery—Banks Holding Limited (BHL).
That company continues to hold 5 per cent of the issued share capital of Banks DIH since both of them have now agreed to co-operate in the marketing of beverages in the future.
According to Reis, the consideration for the repurchase of ordinary shares was $5.5 billion financed through cash resources of $4.5 billion and borrowings.
He said at the time “the expected impact will be a reduction in capital and reserves attributable to shareholders.”
In recent years too, the company has also made capital expenditure in its fixed assets including the installation of new Krones state-of-the-art Filler, along with associated Conveyors, a Bottle inspection facility and CIP Systems were installed in the Beer Plant.
An on-line Blow Moulding Machine was commissioned in the Water Bottling Plant and the upgrade of the Electrical Power Distribution System continued along with the upgrading of Demico Restaurant and Bar facilities and the Fleet Replacement Policy with the acquisition of additional trucks and forklifts, continued during the year.

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