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Belize TV: Prosser Defaulted on Loan, Loses Belize Phone Shares

Jan. 26, 2006 — Both television stations in Belize have reported that Jeffrey Prosser has defaulted on a $25 million or $30 million loan (the stations differed on the loan's amount) from the Royal Bank of Trinidad and Tobago (RBTT) and has lost control of the shares in the Belize Telecommunications Ltd. (BTL) that he had put up as security for the loan.
In a press release, Prosser spokesman Rene Henry has denied that the loan is in default.
7NEWS reported Tuesday night: "He was already on life support and now Jeffrey Prosser is fading fast … With that default, RBTT now takes over the security that Prosser had pledged to cover the debt. That security is 30.6 percent of BTL's share capital, which at the current share value is worth about US $31 million …."
BTL is the monopoly phone company in the Central American nation.
Henry's release said in part: "Reports on two Belize television stations that… Prosser… is in default of a loan from RBTT Bank of Trinidad and Tobago are false."
7News on Wednesday night aired the Henry denial but added that its sources, including a Belize government official, confirmed that the loan was in default. Henry's statement did not claim either that the loan had been repaid, or that it was in current payment status.
The Source called the headquarters of RBTT in an effort to secure more information; a substantive return phone call was promised but had not taken place at press time.
Both Belize stations speculated that Lord Michael Ashcroft, the British investor who again controls the local phone company as he did before the arrival of Prosser on the scene, would be a logical purchaser of the stock from the Trinidad bank. Both stations identified the debt as Prosser's but Prosser's Innovative Communication Corp. may be the formal signatory to the bank papers.
A further discrepancy in the Belize TV reports relates to whether the loan was used to purchase the stock in question. Channel 5 said that this was the case, while 7NEWS simply reported that the stock was used as security for the loan, without discussing the purpose of the borrowed funds.
Channel 5's version of the use of the funds, appears to conflict with a previous report on the origin of the funds to make the purchase (See "Stop Spending Stock Proceeds, Phone Company Told").
In that article, in the summer of 2004, the Source reported: "In its complaint against the phone company RTFC alleges that Innovative Telephone has already loaned ICC $28 million to make the Belize acquisition."
RTFC being the Virginia-based Rural Telephone Finance Cooperative, a specialized banking institution that makes loans to rural (and insular) phone companies, and Innovative Telephone being the operator of the Virgin Islands' phone system, and a wholly-owned subsidiary of ICC.
At the time (August 2004), the Virgin Islands Public Services Commission ordered Innovative Telephone not to spend any more money on the phone company in Belize: Innovative Telephone had just raised $84 million from a sale of preferred stock.
A likely explanation to the apparently conflicting stories on the use of the loan money may be this: Innovative Telephone, which is very secretive about its finances, may have used funds from the sale of preferred stock to buy the shares, and then pledged those shares to RBTT in return for a loan that was used to meet a related demand of the Belize government. That demand was that if Prosser and his companies wanted to control the local phone company they had to first absorb the multimillion dollar debt of a bankrupt local telecommunications firm. That firm, Intelco, had been started by friends of the local government and then had collapsed.
An attorney knowledgeable about ICC's tangled finances agrees that the explanation above is the correct one; Henry's statement also supports this analysis.
Meanwhile, back in the Virgin Islands, the Daily News, which is owned by Prosser, recently ran an article that discussed an aspect of the finances of RTFC, which has been suing ICC for the last two years over what it regards as broken loan agreements. The article bore the headline: "Unreliable accounting by company that controls RTFC forces amendments to SEC filings."
The article noted that the National Rural Utilities Cooperative Finance Corp., parent to RTFC, "will amend an $8 million overstatement on its net margin for the quarter ending Nov. 30, 2004 and an understatement of $7 million for subsequent quarters."
To put those figures in perspective: The NRUCFC is an organization with a $30 billion balance sheet; the $1 million dollar net overstatement amounts to 0.000033% of the balance sheet. The initial $8 million overstatement is 0.00027% of the balance sheet.
Over- or under-statements of earnings in this instance do not affect the value of a traded common stock, as they would with most corporations, as there is no stock to trade. NRUCFC is a cooperative owned by ICC and other insular and rural utility organizations, mostly nonprofit cooperatives themselves.
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