Seasoned banker, Conrad Plummer who has been appointed as administrator of Globe Trust and Investment Company Limited (GTICL) says the institution could be transformed into a viable concern in about two years, if all goes to plan.
“It is not going to be an easy job. The road to recovery would be lined with all sorts of handicaps and hurdles, and at any one time, it could be brought down. This is because the institution has no buffer to compensate for unexpected shocks. But I believe Globe Trust can be rescued,” Plummer said in a recent interview.
A major task he would face in the months ahead would be re-establishing the trust of depositors and investors in Globe Trust and winning support for the reforms he would propose. But he is not daunted.
“For me, this appointment is a challenge. If I can play a part in turning this institution around, then I would feel that my years of training and experience have been put to good use.” In some quarters his appointment as administrator has been met with high expectations and he hopes he would be able to live up to these. However, he emphasizes that the problems of Globe Trust did not occur overnight and estimates it would take a while for corrective action to take effect.
Plummer was appointed administrator of Globe Trust on December 2, fifteen months after the Bank of Guyana took possession of the institution to liquidate it, and five months after Chief Justice Carl Singh granted it a new lease on life, ordering its reorganisation. He is tasked with keeping the organisation afloat until reorganisation; ensuring some surpluses in the institution’s finances leading up to reorganisation; instilling in depositors some realistic level of expectancy; collecting outstanding debt; and preparing a comprehensive reorganisation plan to return GTICL to profitability.
Currently the groundwork for the crafting of a reorganisation plan is being laid and measures are being taken to halt the further erosion of GTICL’s capital base and in establishing some surplus resources.
GTICL has little income and its survival is a month-to-month proposition, Plummer said. Cash outflows are being met from cash loan repayments on a miniscule performing loan portfolio. The institution had a loan portfolio in excess of $800 million at the time of seizure but only about $100M of this is being serviced. Additionally, because of the precarious state of the company, collection of debt since seizure has hit a plateau. This is because the easier loans have been worked on and the more difficult ones are now being dealt with. Plummer said many persons may have held to the view that Globe Trust would sink and as such are unwilling to repay their obligations. But he said he intended to go after everyone to recover sums owed.
Staff costs currently account for 65-75% of current expenses and Plummer intends to further rationalise the current complement. There are about 19 employees, in excess of GTICL’s requirements. Plummer said some of the full-time staff would be released with full benefits, and some positions would be combined, restructured and even made part-time. This would be done shortly and those retained would be reoriented in work attitudes to benefit the institution. Meeting the institution’s current expenses using principal repayment on loans has seen the continued erosion of the firm’s capital base.
Cutting back expenses has also seen Plummer slashing GTICL’s interest rates across-the-board on deposits to one per cent. Other commercial entities offer between three and five per cent interest rates.
“GTICL cannot now repay its debt to depositors much less pay interest at market rates. It makes no sense to quote an interest rate which you know you will probably be unable to sustain. It is expected that as things improve, GTICL would be in a position to once again be competitive in terms of its deposit interest rates,” Plummer said. About $750 million is owed to depositors.
The interest obligation on this debt as well as staff costs, are adding to the financial haemorrhage of the company. GTICL is also obliged to pay 15% withholding tax to the Inland Revenue Department on interest bearing accounts. The possibility of a waiver or postponement of this expense would be explored.
The audit of GTICL accounts for 2000-02 is now being worked on and Plummer said the 2002 Balance Sheet would be an accurate reflection of the company’s financial affairs on which he would have to base the reorganisation plan. He expects that the losses of the institution would hit triple digits and would bring home forcefully its true state. The audited accounts are expected to be available in a few weeks.
Currently, GTICL has a little money in treasury bills, some in reserve at the Central Bank and some pension funds money invested. Treasury bills now earn around four per cent, whilst the reserve accounts are not interest bearing.
Plummer said the way forward would be dictated by the clarification of certain legal issues to allow for the implementation of a reorganisation plan. Under the Financial Institutions Act, time limits were set for the approval and implementation of a reorganisation plan prior to an application by the Bank of Guyana for liquidation. But given that the Bank of Guyana moved for liquidation in the first instance, it is not certain whether those steps are still applicable.
As of now, Plummer said a reorganisation plan would be built on the proposals by former GTICL consultants, William Hinds and the Ram & McRae plan, as well as suggestions by other interested parties. He said that those proposals contained the basic elements of a reorganisation plan for Globe Trust.
Components of the proposed plan would include a conversion of debt to equity, postponing debt, injecting new capital into the institution and most importantly putting the trust back into Globe Trust.
“No matter how good a job you do in coming up with a viable reorganisation plan, you have to aim for the day when you open the Globe Trust doors to the public,” Plummer said. He noted that there would be inherent dangers if the institution finds itself in a situation where it has to offer premium interest rates to attract funds and simultaneously offer lower rates on loans. He said that depositors have to be made to understand and to believe that corrective action will be taken and Globe Trust would survive.
“They have to believe that this scenario won’t happen again and if we are not able to convince them then we will have a problem with both current and future depositors.” He said he hopes to accumulate a level of surplus so that at the time of implementation of the reorganisation plan, some of these resources can be released to depositors.
Globe Trust would never be a large player in the financial market but Plummer said if a certain level of business is attracted, it could become profitable.
Once the legal hurdles were cleared, Plummer intends to pursue investor options for the entity and meet with stakeholders. He intends also to advise shareholders on the realistic value of their shares in the institution.
One of the key issues he has to explore is the memorandum of understanding signed between the Office of the President and a group of investors including Eric Phillips. He said this option would be looked at before other sources of equity funding for the institution were explored, including the government as a potential inves-tor.
Plummer expects to have the shell of the reorganisation plan in place in a few months and to be able to secure commitments to accompany this plan thereafter.
He intends to lobby wide support for the reform measures to be undertaken and to keep interest groups abreast of the changes taking place within the institution as they occur.
Plummer said he has so far seen a multiplicity of reactions from customers, ranging from emotional outbursts, such as anger or tears; expressions of feelings of helplessness, anxiety, or a sense of being unfairly treated; threats of court action, or making reports to the President or talk show hosts; or taking matters into their own hands.
The private consultant said he could empathise with those clients as it was not easy to contemplate the likelihood of losing even a portion of money, or not having access to funds that you acquired through hard work and sacrifices in the past.
“I have children and can understand a mother’s ache when her hard-earned funds cannot be released to her to pay for her child’s education - a promise that Globe Trust made when they accepted those funds in the first place.” He noted cases of pensioners who looked at GTICL as a safe haven for their funds and now could not access them and had no other means of earning a living. He said it was not easy dealing with these depositors knowing their hardship was not of their own doing, but this served as his motivation.
He said he was open to any constructive comments and suggestions from depositors or anyone else.