Peter Bunting... founding partner

When Peter Bunting and Christopher Dehring got together a decade ago to sketch the broad outlines of a plan for a Wall Street-type, boutique financial outfit, their very choice of name - Dehring Bunting & Golding - would send a subliminal message to the market that a young, brash trio had arrived.

Yet, only those closest to Bunting would have known that despite his public image, this reticent individual was an unwilling convert to the world of entrepreneurship.

"I am a reluctant businessman," he accepts. "I am at heart a public servant. I never saw myself as being in business."

Nevertheless, Bunting is in business, and as the numbers suggest, in a big and very public way.

At the end of December, his publicly traded DB&G reported total assets of $24 billion, shareholder equity of $687 million, and had posted nine-month net profit of $183 million. Today, Bunting's 11.5 million shares in the company are worth over $120 million.

Bunting, 41, is truly a corporate enigma. Urbane and modest, he relishes the fact that he types his own correspondence; he farms coffee for fun 4,000 feet up the Blue Mountain, and harbours ambition of being a teacher. That noble profession, he reckons, would allow him to transform Jamaica, not with sophisticated financial products, but by directly influencing young minds.

His appetite for this role was whetted recently during an address to some 400 high school students from central Jamaica who had participated in a leadership breakfast that was sponsored by DB&G.

"What I really enjoyed about the experience is that the youngsters are not cynical and resigned, as we are as adults," he says. "It was for me personally, a moment of great inspiration."

The last of four children, with seven years between he and his closest sibling, Bunting grew up on a 360-acre dairy farm in Free Town, Clarendon.

"My father placed a high premium on education so he sent us all to boarding school," noted Bunting who attended St Cecilia Preparatory School in Kingston.

Young Bunting earned a government scholarship to St George's College, having been among Jamaica's top performers in the Common Entrance Exams. He was also awarded a scholarship to Campion College, then a private school for Jamaica's rich - based on his performance on the school's internal exam. He opted for Campion, but continued living at St Cecilia's boarding home for the first two years of high school.

At Campion, Bunting and Dehring were in first form together, and were among the four blacks in a class of 26 students.

"It was the first time that I got a different perspective on the two Jamaica that existed in the same county," he remarked. "It was an interesting social experience because I remember noticing that in my class were primarily Whites and Chinese. By the time I reached third form it became a grant-aided school so more blacks began to enter."

Mark Golding, who later became a partner in DB&G, entered first form when Bunting and Dehring were in sixth form.

"He (Mark) likes to remind me that he voted for me as house captain," says Bunting.

It was while at Campion that according Bunting, he made a transition into "somewhat of a rebel".

"I remember at the time lots of people were migrating. In that whole ferment somehow I identified myself as a bit of a rebel. I remember I was going to turn a Rasta. My shoe lace was always in green and gold, and I began attending Twelve Tribe meetings. I never wore locks my father would have had an heart attack."

He remembers it as a period of heightened political debate and awareness.

"In the late 1970s only three people at Campion were socialist: Chris was one, Tracy Melhado, and myself." At Campion, Bunting also met Peter Reid, who became a vice-president of DB&G during its early years. His father, Vic Reid, noted author, inspired Bunting "in terms of struggle and revolution". He also met through businessman OK Melhado - the father of Tracy Melhado - then opposition leader, Michael Manley and other "movers and shakers".

Bunting remembers giving thought to taking off a year or so after high school, but quickly shelved the idea after a brief talk with his father.

"That's an interesting decision," remarked Bunting senior. "Where are you going to live?" he inquired.

Young Bunting's idea was to afford his father the pleasure of his company during his year-long hiatus from school.

"Well", came the response, "if you are not in school, it means that you are a big man and two bulls cannot rule in one pen."

As a compromise, his father outlined a series of employment options on the dairy farm - from milking cow - to cleaning the barn.

"I decided that university was not such a bad option after all," resigned Bunting.

He remained uncommitted however to any specific career path, a decision which was eventually made for him by his classmate and Campion track star David Moore who had himself applied to study at McGill University in Canada. Moore got Bunting an application form, and submitted his name for an engineering degree.

Bunting says while in high school he wanted to study literature, but was encouraged to pursue the sciences by his father.

At McGill, he discovered that engineering was a professional degree, which allowed for very little opportunity for exposure to non-core courses like literature and history in which he had an interest.

Bunting completed his engineering degree in 1983, but had no doubt about his disinterest in the profession.

His option was to pursue an MBA in finance, which he did, on a scholarship from the University of Florida, a starkly different environment from metropolitan Montreal.

"Montreal is a cosmopolitan city, and the downtown campus afforded us real exposure to the world and all the different cultures. There were lots of East Asians and other nationalities. It was really as dynamic environment."

In contrast Florida University was, according to Bunting, "a deep south experience"; the community having lynched a black man just weeks prior to his arrival.

"It was my first serious exposure to racism," he said.

During spring break of the final year of his MBA programme, Bunting came to Jamaica, and did eight job interviews. He got an offer from Citibank.

"I was so impressed by the efficient way with which they handle everything that even though I did not previously had any thoughts about banking, I accepted it."

In that batch were some of the most outstanding young bankers to have emerged in Jamaica during the period. They include: Andrew Cocking, now deputy president of Capital & Credit Merchant Banking Group; Chris Dehring; Michael McMorris who later became chief executive officer and capital partner in Knutsford Capital Merchant Bank, which was later sold to Pan Jam; Peter Reid, now an executive at Scotiabank; Ann Shirley, former CEO of CIBC Jamaica; Howard McIntosh, former managing director of Corporate Merchant Bank.

"We used to call Peter Moses - head of Citibank in Jamaica - the dean of the school of banking," quipped Bunting, who started as an account manager in the bank's corporate banking group.

"It was an excellent training ground", he says of his two-and-a half year Citibank experience. By the time he left the bank he was the manager of specialised finances where he was responsible for putting together corporate finance types deal.

One major project he recalls is the debt to equity conversion programme that the Edward Seaga regime pursued in the late 1980s as a strategy of reducing Jamaica's external debt. Under this programme, entrepreneurs who wanted to invest in Jamaica could buy the government's debt at a 60 per cent discount - from the commercial banking consortium that held them - and surrender them for conversion at the face value at the point of investment. Most of the investment through this project went into the garment sector.

Bunting's major move came at the beginning of 1988, when a group of investors led by OK Melhado and Cliff Cameron, approached him to head up a merchant bank they had on the drawing board.

"At age 27 I was being asked to leave a secure position at Citibank to start this bank from scratch," he said.

In fact, Cameron, who was the largest shareholder and who became chairman of the bank, recalled that at the time, it was Bunting who interviewed the shareholders to establish if they had the strength of capital, commitment and business ethos to successfully operate a bank.

"It was amazing, he interviewed us," Cameron recalled of the time.

Manufacturers Merchant Bank with the minimum prescribed capital base of $5 million was formed with Bunting as CEO. At the time, Eagle and Pan Caribbean were the established and well-known merchant banks.

"It was exciting," noted Bunting. "From the start it was a success. It took off very quickly and was profitable from day one."

Manufacturers was created just ahead of the late 1980s frenzy of banking start-up with institutions like Capital and Credit, Corporate Merchant, Horizon, and Knutsford Capital, among others, following.

Bunting says he started Manufacturers Merchant with his secretary from Citibank and was joined by Cocking as his number two man - in charge of marketing within two months. "We had a great time. We did lots of interesting deals like vendor financing, and traditional loans. We introduced instruments that did not require withholding tax."

Part of Bunting's compensation package was an equity stake in the bank. But he said, within two years, his public sector orientation began to take hold of him. So when Michael Manley, who had won the 1989 general elections, offered him an opportunity to be part of his public sector management team, he agreed. He became vice-presidency of the National Investment Bank of Jamaica (NIBJ), where Asgar Alley was president.

Bunting had maintained his contact and friendship with Manley while he was abroad studying, and remembers helping to host him when he visited McGill in the 1980s.

"When he was elected in 1989 I became a sort of private sector market advocate - always sending him ministry papers on liberalisation," recalled Bunting. "After a while he said 'why don't you come and show me'."

At NIBJ, Bunting was placed in charge of privatisation, and within nine months, took over as president.

"We were the vanguard of the liberalisation programme," he says. "We used to meet with the World Bank, IMF, IDB."

He was also on the board of the PCJ and chaired its committee that dealt with the deregulation of the petroleum sector.

"At the time the entire pricing structure of the industry was regulated by the government - all prices and margins," recalls Bunting.

In fact, prior to working at NIBJ - and while still at Manufacturers, Bunting was chairman of the committee to deregulate the petroleum sector, which was completed in six months.

"We developed the policy basis for privatisation through the ministry paper no 34," he says. "The privatisation started under Seaga, but it became more comprehensive - and included assets like Carib Steel, Cement Company, NCB, Government Printing Office, hospital services."

While at the NIBJ, Bunting was one of three government officials who visited the Dominican Republic prior to liberalisation in the early 1990s to study the experience of that country which had gone that route a few years before.

"At the time everybody agreed it was necessary - but in the future," he recalled.

Bunting became one of the inner circle advisors to Manley that he said included Peter Phillips, Anthony Hilton, Desmond Leaky, among others.

"It was an exciting time," he said.

In 1993 he ran in the general elections on a PNP ticket, and defeated the incumbent, Hugh Shearer.

He was named parliamentary secretary in the Ministry of Health in Prime Minister PJ Patterson's cabinet . In 1994 he was seconded to the transport and works ministry to work on Air Jamaicas privatisation. In 1995 he resigned as parliamentary secretary.

But by the time his political career had begun to unravel, Bunting was already deep in the world of business.

It had started back in 1993.

"I was having lunch with Chris (who was general manger of Corporate Merchant Bank at the time) and he said, 'we done it for other people why not for ourselves'," recalled Bunting.

The high school friends immediately began to sketch the outlines of a business plan on the napkin. "The idea was to create a corporate finance boutique, to bring companies to the market, to do corporate finance. That was the concept."

At a second meeting Mark Golding, now an attorney at law, was brought to the meeting.

"Next thing I know Chris called me and told me that he had resigned from his job - so there was no turning back."

The company began with an initial capital of $37.5 million, raised from a combination of private investors and an initial public offer. Of that amount, the holding company - DB&G Holding subscribed (19 million shares) 51 per cent. Within the holding company, the three investors together held the majority shares. The three had to come up with $12 million.

Bunting raised his $5 million by selling the 7.5 per cent stake he had earned in Manufacturers Merchant Bank by way of sweat equity.

The other shareholders in the holding company were businessman Barclay Ewart Phillip Martin from Caribbean Fencing, some members of the Hart family from Montego Bay, and another Montego Bay businessman, Earl Harriot.

"These were really people we had done business with, and developed relationships with so when we were going out to start we approached them," said Bunting. "We did a private placement that went out to a few hundred individuals and gave a commitment to list on the Jamaica Stock Exchange."

Dehring became CEO, and Bunting, chairman. At the time he was president of the NIBJ.

At the beginning of 1995, Bunting joined DBG full time while he remained a member of Parliament.

At the end of 1996, Dehring left DB&G to join the West Indies Cricket Board as marketing director. Bunting went over to DB&G full time in 1997 as executive chairman.

The investment bank survived the meltdown that hit the financial sector in the mid to late 1990s, but by Bunting's recollection, the pace of growth came to a crawl because of the changes in the market.

"In the mid-1990s the business we had anticipated was not there," he says.

"There was a downturn in the stock market, there was high interest rates turmoil in the financial sector. We started to diversify."

Around 1997, DB&G began trading foreign exchange, having acquired a cambio licence. The company then got into the funds management business, providing investment advisor for clients, in a manner similar to Jamaica Money Market Brokers.

Then the opportunity came to acquire Billy Craig Merchant Bank, one of the scores of financial institutions that had ran into problems during the meltdown.

"Billy Craig gave us a presence in the western end of Jamaica - Sav and Mandeville It allowed us to begin our diversification into the retail end of the market," explained Bunting. The Montego Bay and Kingston branches were merged into DB&G's existing operation at those locations.

The Billy Craig acquisition took nearly two years to be consummated - from 1996 to 1998 - because DB&G discovered that the company was more perilous than had been anticipated prior to the due diligence.

"We realised that they had negative capital so we approached Finsac and did a joint rescue where we both injected capital to make the company viable," Bunting said.

The merchant bank with assets of around $450 million became a subsidiary of DB&G.

"The main thing that we got was the branch network and some good staff particularly in the branches," noted Bunting; Osmond Jackson in Sav; and Chorvelle Johnson in Mandeville. They have done phenomenally well.

The acquisitive CEO then cast his eyes at Eagle Unit Trust, which had been placed on the market for auction in 1999.

Initially Pan Jamaican Group won the bid, having bought the company for $97 million, but backed away from the deal when the government removed the tax-free status from the earnings from the unit trusts.

DB&G bought the unit trust for $115 million in 2000.

The unit trust gave DB&G a backdoor entry into the brokerage business - the company having from as far back as the early 1990s applied for a seat on the stock exchange but resisted the $20-million price tag.

"We saw it as broadening out product range," says Bunting. "It gave us an equity fund...From day one we had planned to get into the brokerage business. This was out of frustration and our own way to get into the equity market. There was no overlapping between their client base and ours."

Eagle had assets of $1.6 billion consisting of $1.5 billion in money market funds, and $100 million in equity funds.

The equity fund now has $600 million and posted tax-free returns of 46 per cent last year.

At the time of the purchase the unit trust had a book value represented by cash and stock of $85-plus million, which meant that B&G paid a $30-million premium for the asset.

But Bunting says that the premium was made back within the first year of operation.

Last year DB&G paid $15 million to acquire a seat on the Jamaica Stock Exchange - less than what the exchange was demanding 10 years before.

Bunting says it has been one of his company's best investments to date. The reason, he says, is that the acquisition was done with minimal physical investment and without having to employ additional staff. For the first 11 months of operation, the brokerage earned commissions of just under $40 million.

"Part of the strategy is to diversify our income stream," says Bunting. "It also complements the unit trust business."

DB&G has also in the past two years done some mega-deals from which it has earned fee income. For example, last year, it successfully floated a $3.5 billion 30-year bond for Highway 2000 project.

"We did a lot of research internally to see how these infrastructure-type projects are financed, and came up with an inflation index bond," explained Bunting. "The bond gives a return which is three to four per cent above inflation. Nobody had raised 30-year money prior to that issue in Jamaica.

At the end of 2001, DB&G also raised US$100 million for the government, which had earlier made an unsuccessful attempt to raise the funds on its own.

"Last year we did several private fund-raising for the government - billions of dollars," noted Bunting.

Bunting speaks with obvious pride of what he describes as the high quality staff at his company and the level of returns that shareholders have enjoyed.

"If you had invested $1,000 in DB&G in 1999," he pointed out, "today that investment would be worth $15,000" - a feat he said not easily matched in Jamaica.

At present, DB&G has eight branches and 140 members of staff. Bunting says that the branches are run as semi-autonomous units, like a franchise, where the products are provided and the managers and employees are required to provide the quality service to make their branch profitable.

"Our branch managers are the key. We tell them to think of it as a franchise - as your business - you have the product, and must manage it and price it. Their compensation is a share in the profit from their branches, paid each month in arrears."

The rest of the company operates with what Bunting describes as a flat organisational structure.

"It is really a flat organisational structure, they are largely self managed," he stresses.

With Bunting as executive chairman, there is a president and chief operating office, Garry Sinclair.

Bunting focuses on the strategic side of business - acquisitions, personnel, sales and marketing, while Sinclair oversees treasury and operations.

Bunting believes that what is critical for DB&G going forward is for the organisation to remain flexible to respond to Jamaica's changing economic environment.

"We have reinvested ourselves several times and expect that in this volatile environment we will continue to do so. Our purpose has been to be a catalyst for growth and development for our customers, shareholders and staff."

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