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'Disillusioned' - <span style="font-weight: bold">They kicked me out of my company</span>
Former Homelectrix director speaks of death of Finsac’d company
BY PATRICK FOSTER Observer writer [email protected]
Friday, February 25, 2011
A debt which ballooned from $117 million to $500 million has been blamed for the collapse of furniture and appliance retail giant Homelectrix after the Financial Sector Adjustment Company (Finsac) stepped in.
George Hugh, a former director of Homelectrix, described the loss of his business as an ordeal which he said deteriorated his brothers, who were his business partners, "mentally and financially" and left them disillusioned about doing business in Jamaica. Hugh, at the same time, is still hurting that attempts to get an explanation about the huge jump in the debt resulted in him being forcibly removed by the police from the Homelectrix premises.
Finsac was the vehicle used by the Government to restore stability to Jamaica's financial institutions during the 1990s banking collapse.
To finance its operations in 1993, Homelectrix had borrowed money from Workers Bank -- one of the institutions taken over by Finsac.
Hugh, testifying at the ongoing enquiry into the 1990s financial sector collapse, said that a <span style="font-weight: bold">Workers Bank loan at 30 per cent rose to 70 per cent in just over two years, leaving his company unable to properly service its debt.</span>
Admitting that the 30 per cent interest rate was "steep" from the outset, Hugh said that the company took the loan as projections were that it could be financed through hire-purchase sales, which were at 42 per cent at the time.
"It [interest rate] remained at 30 per cent for about a year before it started to move, going to a high of 70 per cent," Hugh told the enquiry. "It destroyed the company, there was no way we could pay back at 70 per cent."
He contended that when the interest rates moved upward dramatically the hire-purchase charges remained below the interest rate on the loan and could not sustain the business.
According to Hugh, as Homelectrix floundered he entered into an arrangement with Workers Bank to consolidate the debt at $700 million after discrepancies arose about the actual amount owed.
Workers Bank had indicated that $1.4 billion was owed by Homelectrix.
Hugh, however, told the enquiry that the bank reneged on the agreement, which included the provision of capital injection to continue the business. "They said that they did not give loans anymore," said Hugh, who operated the chain of 30 stores islandwide with his brothers Raymond and Antonio.
<span style="font-weight: bold">He testified that his company paid down the debt to $117 million, but after Finsac acquired the bank's assets in 1998 Homelectrix received statements from lawyers that the arrears were at approximately $500 million.</span>
Hugh's attorney Dr Christopher Malcolm this week entered evidence which, he said, corroborated a variance in the amount owed.
According to Hugh, efforts by company directors to reconcile the loan with Finsac were met only by the police turning up at the Homelectrix head office in 2002 and throwing him out.
"They kicked me out; police escorted me out of the place," Hugh told Finsac enquiry commissioners Worrick Bogle, Charles Ross and Justice Henderson Downer.
"Efforts to discuss the statements were unsuccessful and there was no explanation from Finsac regarding the difference," Hugh said.
He added that Homelectrix had even proposed a buy-back of the debt from Finsac at 30 per cent but received no response.
Finsac thereafter sold the debt at what local business owners described as ridiculously low rates to foreign-based debt collection company Beale Bank, represented by Dennis Joslin.
Asked by the commissioners about the status of the hire-purchase agreements after Homelectrix was taken over, Hugh said he had no idea what happened. "Ask them, don't ask me," he responded in reference to the Jamaica Redevelopment Foundation (JRF) legal team present at the enquiry. JRF took over operations of the non-performing loan portfolio from Joslin.
Hugh estimated the value of hire-purchase receivables due to Homelectrix at $200 million when the company was closed down.
"High interest rate and accounts not reconciled, and nothing has ever been explained," Hugh muttered as he presented his case.
The Hugh brothers bought Homelectrix, once a cornerstone in the local home appliance market, from the Matalon family-owned ICD group of companies.
"We operated 30 stores across the island employing some 200 people," Hugh said, adding that many more people were affected, including numerous suppliers and tradesmen, when Homelectrix was taken over.
Read more: http://www.jamaicaobserver.com/news/...#ixzz1EyznLmiU
<span style="font-weight: bold">n mi ha a cheque plus shares from Workers mi cannot get anybody to honour...di cheque dem send mi dead modda fi honour har money bounce..dat was bak in the late 80s...everytime mi go yaad mi hear a diffrant story bout who to pay me </span>