Dennis Lalor

DENNIS Lalor yesterday terminated the contract that the David Panton-led Caribbean Equity Partners (CEP) had for the management of the US$45-million Caribbean Equity Fund which Lalor himself was instrumental in creating three years ago.

The fund, which has a stake in firms like IGL, Salada, and Jamrock, will now be managed by Caribbean Basin Investors Limited (CBI), Lalor confirmed yesterday. Lalor is the principal shareholder in CBI.

Dr David Panton

At the time the contract was brought to an end, Dr Panton, a Rhodes Scholar turned entrepreneur, was essentially the only substantial shareholder in CEP. He had bought out the other two shareholders - Rhodes Scholar, Dr Nigel Clarke, and Jeffrey Hall - with whom he had partnered to create the investment vehicle in 2000.

Hall, the son of Dr Marshall Hall, the CEO of Jamaica Producers Group, migrated last year to the UK to take up a posting with a Producers' subsidiary in that country. Clarke was recruited by NCB's billionaire owner, Michael Lee Chin, but this year left the bank to join the Seprod Group.

Lalor explained yesterday that the departure of two of the three principals of CEP had triggered a clause in the funds management contract for its automatic termination.

"The agreement was for them to have exclusive management of the fund but if any two left, the agreement would be terminated," said Lalor. "Two of the three have gone separate ways leaving David alone. So David and ourselves agreed that it was appropriate to invoke the particular clause."

Panton stressed yesterday that "CEP is quite pleased with the investment" and that his firm was now "looking at a variety of options".

Two persons have been appointed to plan executive roles in the management of the fund -- another Rhodes Scholar and lawyer, Eleanor Brown as executive vice-president; and chartered accountant, Steve Holland.

They will be supported by the four-member board appointed by Lalor:

* investment banker, Oliver Holmes;

* former NCB CEO, Geoffrey Cobham;

* Bevon Francis; and

* Noel Levy, senior partner at the legal firm

Myers Fletcher and Gordon.

The Caribbean Equity Fund is the brainchild of Lalor, the owner of the Insurance Company of the West Indies (ICWI) and former majority shareholder in Life of Jamaica.

In 1998, Lalor convinced the governments of the region of the economic wisdom of supporting a large venture capital fund that could be a catalyst for investment in the region.

Once they bought into it, Lalor created a vehicle called Caribbean Basin Investors Limited to oversee and manage the fund. He then offered the three owners of Caribbean Equity Partners a combined 30 per cent stake in his investment vehicle, and the exclusive contract to manage the fund. The team was paid an annual commission of two per cent on the total pool of funds that were committed by the investors -- in this case, US$45 million.

CEP's stake in Lalor's company eventually increased to 38 per cent.

It was the three partners who actually solicited and raised investment or commitment for the fund - from various government bodies and private investors across the region, including Jamaica's National Insurance Fund (NIF).

"They were appointed managers with two roles," explained Lalor. "To get the investors to agree to invest in the fund, then to manage the fund and find deals to invest the money in."

To effectuate the termination of the contract yesterday, Lalor acquired Panton's 30 odd per cent interest in CIB. Neither of them would say how much money was involved in this transaction, or if indeed any actual cash changed hands.

Lalor did say, however, that "recognising that the change would leave them (CEP) with liabilities, like redundancies and statutory payments...we provided money to cover that and acquired some of the fixed asset".

Lalor told the Observer that the new funds managers would be immediately mandated to review the portfolio of investments "to see if it makes sense to continue in these (marginal) investments, and we will take that decision within a month".

Among the portfolio, he said, were some strong investments like Salada and IGL, along with some marginal assets.

"The fund has some good investments like IGL, Salada, and Malika," said Lalor. "Those three investments represent the bulk of the portfolio -- about 80 per cent."

To date, the former fund managers were able to secure commitment of US$45 million from investors around the region, Panton said yesterday. About U$30 million of this amount had been called upon, though not all of that had been actually invested, he said.

"Some of it is awaiting investment," he explained.

According to Lalor, Brown's role as executive vice-president would be to review all of the legal side and documentation, and to promote investor relations.

"After that we will be looking at deals then engage her in an expanded role," he said.

Brown is not new to the fund. She was brought into CEP by Panton around the time that the fund began to take a stake in Jamrock restaurant and sports bar in New Kingston. She was placed in charge of that operation.

Holland is being seconded from ICWI where he has been a vice-president since 2002.

"He will see to it that all the financial affairs of the fund and CBI and all statutory and banking requirements are met," said Lalor.

Lalor added that the external investment committee would continue in operation. The members are:

* Sandy Maier from Citibank;

* Wendell Mottley, former minister of finance in T&T, now an investment banker in New York;

* Joe Mounsey, who was the investment vice-president for Manufacturers Life worldwide investment portfolio; and

* Hugh Henry-May, who used to work with the world bank's subsidiary, IFC, with responsibility for Caribbean and Central America.

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