The assets to be realised consist primarily of over J$32Billion of Non-Performing Loans, and J$20Billion of "non-core business" assets acquired from the intervened institutions. The "non-core" assets comprise hotels, commercial and residential real estate and sundry other assets such as motor vehicles, furniture, artwork and office equipment.

The workout and sales efforts of the department resulted in cumulative loan collection of J$5.2Billion and asset sales of J$11.7Billion as at March 31, 2001.

During fiscal 2001/2002, the department aims to sell this entire loan portfolio, and to dispose of all, or a substantial portion of the real estate under its control. This will facilitate the winding–up of FINSAC itself, along with the several FINSAC–controlled entities.

NON-PERFORMING LOAN UNIT

The department’s Non-Performing Loan (NPL) Unit has been operational since September 1998 and was created to manage the portfolio of loans assumed by FINSAC as part of its intervention in the financial sector. As at March 31, 2001 it was managing 25,500 non-performing demand loans, mortgage accounts and credit card accounts. During the fiscal year 2000-2001 the portfolio was increased by the acquisition of 3,500 additional loans and 5,200 credit card accounts previously managed by National Commercial Bank. This became necessary to ensure that all FINSAC accounts were on a common database in preparation for the sale of the managed loan portfolio. Streamlining of the unit’s operations last year ensured the smooth assignment of these new accounts to our Workout Officers for rehabilitation and/or collection.

Notwithstanding the emphasis on collections, there is also a consensus on the importance of maintaining viable business operations. Hence, the Unit referred accounts falling within the parameters of the National Industrial Policy to the Oversight Committee. This 14-person committee, formed at the end of 1998, includes representatives of the public, private industry, the Government of Jamaica and FINSAC. Its mandate is "to determine transparently and independently " whether or not accounts submitted to it are eligible for re–structuring.

For the period under review, loan accounts valued at J$838.5Million were restructured and/or rescheduled, bringing the cumulative total for the restructuring/rescheduling of such loans to J$9.7Billion.

(Restructured debts are those where the debt itself may have been compromised and new terms of repayment can be agreed on, based on the debtor’s financial position as determined by FINSAC. Other debts may simply be re–scheduled. Rescheduled debts are those where the existing debt is put on a new timetable for repayment based on representations by the debtors regarding their ability to repay.)

The NPL Unit’s achievements during the 2000/2001 financial year were:

• total loan collections J$5.2Billion as at March 31, 2001 – (March 31, 2000 - J$3.3Billion)

• 2,060 accounts now restructured with a total value of J$838.4Million – 1,740 last year

• reduction in the number of companies in receivership

• a major hotel returned to the principal for management after the conclusion of negotiations regarding indebtedness

• major manufacturing companies restructured to ensure continued production.

LOAN SALE

Based on a review of the volume of work and the resultant cost of the continued management of non-performing loans, FINSAC recommended to Cabinet that the sale of the portfolio to debt-collection specialists was the best option to pursue. This was after a careful analysis of the collection data and the quality of the portfolio, as well as international practices in dealing with non-performing loans acquired by the state as part of a financial sector restructuring exercise.. This recommendation was accepted.

To this end, the services of Ocwen Financial Corporation, an internationally respected specialist consulting company was retained to analyse the portfolio, prepare a diagnostic review, propose integrated marketing and disposition strategies and package the portfolio for sale.

Notice of Loan sale was posted in mid-March 2001 with a deadline for bids to be submitted by the end of April.

The portfolio was advertised for sale on the local and international markets. Based on the interest expressed, it is expected that a sale will be finalised during fiscal 2001/2002.

ASSET DISPOSAL UNIT

The Asset Disposal Unit (ADU) has direct responsibility for the management, maintenance and ultimate disposal of the assets described at the beginning of this section of this Annual Report. These comprise those assets managed by FINSAC directly through intervention activities, as well as assets which are put up for sale after failure to recover debts through all other collection avenues.

During fiscal 2000/2001 the responsibilities of the ADU broadened and a number of functional project teams were consequently established.

The responsibility for the management of all properties of Jamaica Mutual Life Assurance Society and Crown Eagle Life Insurance Company and their related entities was taken over as a direct responsibility by FINSAC, and the related staff members were brought under a new Maintenance project team within FINSAC. This team also took responsibility for the management of several major properties acquired by FINSAC from NCB (Investments) Limited, as part of the 2000 Scheme of Arrangement involving NCB, NCB Group and its shareholders. These included the Baywest Shopping Centre in Montego Bay, St. James and the St. Jago Shopping Centre in Spanish Town, St. Catherine, as well as some eight strata lots in Sunshine Village, Negril, Westmoreland.

A special Liquidation project team, working in conjunction with PriceWaterhouseCoopers was established. This team was charged with responsibility for resolving residual issues affecting a number of dormant entities, and eventually arranging for their liquidation. All remaining winding-down activities of Mutual Life, including the sale of its mortgage portfolio were brought under this Liquidation project team. The responsibility for the disposition of the remaining assets of the Eagle Permanent Building Society and Eagle Merchant Bank of Jamaica was also brought under the Liquidation project team.

The Unit has accomplished the following during the fiscal year 2000 - 2001:

Disposal of Non-Hotel Real Estate

During fiscal 2000/2001 some 116 real estate holdings totaling over J$1.2Billion were sold - (J$0.892Billion sales still in progress). This compares with 83 properties totaling J$0.64Billion over the previous year, and brings the cumulative total for the sale of properties to over J$11.7Billion as at March 31, 2001, up from J$9.352Billion as at March 31, 2000. Major commercial properties sold include:

• Pavilion Mall

• 30 – 36 Knutsford Blvd

• 66 Half Way Tree Road

• 21 Constant Spring Road

• 2-6 Trafford Place

• 15 & 30 Grenada Crescent

Disposal of Hotel Interests

Sales were completed on four hotel properties totaling US$29.25Million in value. Of the remaining hotels, Ciboney has been leased to a leading operator in the hospitality industry for a 3-year period, with an option to purchase at any time within the lease period. The disposal of FINSAC’s 49% interest in Jamaica Grande, however, remains the most challenging, due to its complex ownership structure. The hotel assets disposed of during this period were:

• The Crowne Plaza, Kingston

• Navy Island

• The Terra Nova

• Boscobel Beach Hotel

Artwork

64 pieces of artwork from the Mutual Life collection were auctioned during this period. 35% of the pieces entered in the auction were sold, realising J$3.9Million, bringing the total divestment in Artwork since the commencement of FINSAC’s divestment efforts to J$19Million.

A summary of the department’s Completed Sales of Assets is set out in chart form in Appendix III of this Annual Report.

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