Ciboney Group Limited, the listed entity which is being promoted for sale by the Financial Sector Adjustment Company Limited (Finsac), holder of 72 per cent shareholding, needs an injection of cash to remedy a shareholder’s net deficit which has been reported in the range of $6.7 million and $2.7 million between May 2022 and September 2022.

A ministerial paper, which was tabled in the House of Representatives and released on Friday September 9, indicated that the company carries shareholder’s net deficit of $2.7 million on balance sheet, which has therefore placed the entity in breach of Jamaica Stock Exchange (JSE) rules and put the company in danger of being delisted.

Ciboney’s audited financials for the period ending May 31, 2022 puts the deficit at $6.7 million. It is not known if majority shareholder Finsac has injected cash in the period in between.

General manager of Finsac Errol Campbell told the Jamaica Observer on September 12 that the deficit can be remedied when the company which buys Ciboney injects cash.

Finsac has a plan to dispose of the asset by selling it to a company which wants an easy route to listing and could access the market via the reverse takeover method.

The Business Observer reached out to the JSE to check on the timeline available to remedy the shareholder balance, but no response was received up to press time.

Ciboney Group Limited sold all its assets and bled itself of cash while waiting for a buyer.

The listed vehicle has been advertised in the last decade by Finsac as a vehicle for any company which wants a simplified route to public listing and the benefits of traded stock.

Prospective buyers will be considering the reverse takeover (RTO) process in which private companies seek to become publicly traded without going through an initial public offering (IPO). The private company needs to buy enough shares to control the publicly traded company. The private company’s shareholder then exchanges its shares and so effectively becomes publicly traded. The RTO is often called a reverse merger or a reverse IPO.

Finsac has been advertising since 2015.

The years have slipped by as Finsac sought buyers for its 72 per cent stake in Ciboney Group, totalling more than 393 million shares. In October 2021, the majority shareholder asked that bids be submitted by November 8, 2021, along with company profile and the proposed business venture.

In the first quarter of 2022, a buyer was identified, but the long process of approval followed by Finsac, a government agency resulted in the prospect getting away.

It was explained by Ciboney’s directors on June 29, 2022, in a statement released via the JSE, “Regarding efforts by the majority shareholder to dispose of its shareholding, we have now been informed by the majority shareholder that from the offers received and following the usual due diligence exercise, a suitable prospective purchaser was identified as the preferred bidder. As required by relevant government protocols, requisite approval was sought for the sale to this preferred bidder and this has now been received. Sadly, this preferred bidder has written to the majority shareholder withdrawing its offer and also advising that it has no further interest in acquiring this asset. The directors understand further that the majority shareholder is reviewing its position and will communicate with us in due course how it proposes to move the matter forward in relation to the disposal of its shares, at which time, this information will be shared.”

Campbell told the Business Observer on Monday that he would be seeking legal advice as to the way forward.

Ciboney, which once operated in the tourism industry, was one of the assets taken over by Finsac under a bailout programme by the Jamaican Government in the 1990s to rescue companies in the troubled Jamaican financial sector.

The company’s stock traded at 0.53 cents per share on Monday, September 12, 2022, valuing the company at $297,048,570. Shares outstanding are 546,000,000 units. Finsac’s reserve price for its shareholding is unknown.