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January 10, 2001
UPDATE ON THE
STATUS OF THE
LIQUIDATION OF FIRST CAYMAN BANK
In view of
the lapse of time and to ensure that all creditors
of the Bank are kept informed, the Liquidators
felt it was appropriate at this time to provide
an update on the affairs of the liquidation.
The essential
issue being dealt with by the Liquidators
is establishing a balance between their obligation
to effect further recoveries of the Bank’s
assets against the delay this necessarily
imposes on depositors receiving their funds.
Until there are sufficient funds which are
free and clear from potential claims and costs,
the Liquidators are not in a position to declare
and pay a second interim dividend. As soon
as sufficient funds are available for distribution
the Liquidators will initiate the payment
process.
Since the
payment of the first interim dividend of 35
cents on the dollar on April 20, 2000, the
Liquidators have initiated various legal actions
against certain parties who either contributed
to the Bank’s losses or who have failed
to meet their obligations to the Bank (i.e.
borrowers of the Bank). Although the Liquidators
expect to recover additional funds from these
sources the timing of any such receipts is
dependent on the successful conclusion of
each individual action, which cannot be accurately
projected. The key actions are outlined below:
Asset
Realizations
• There
are currently about 280 loans which remain
outstanding on the books of the Bank. Approximately
80% of these loans are in default. Many
borrowers used the closure of the Bank as
an excuse to cease repayments. There are
therefore a large number of debtors who
are making infrequent or no payments at
all. This requires the Liquidators and their
staff to follow up and monitor the accounts
on a regular basis.
• In
those cases where there appears to be a
reasonable opportunity to recover a portion
of the loan balance in relation to estimated
costs, the Liquidators have initiated legal
proceedings against the debtor. These actions
include foreclosure proceedings, wage garnishee
orders and repossession of property given
as security.
Legal Actions
• The
Liquidators are in various stages of settlement
negotiation or legal action with certain
of the directors and officers of the Bank
. The Liquidators have initiated legal action
in Grand Cayman against the directors and
officers to recover losses suffered by the
Bank as a result of their negligence. Unfortunately
the remote domicile of the directors and
officers creates certain jurisdictional
and legal complexities which will significantly
delay a final resolution of this matter.
• The
Liquidators have initiated legal action
in Florida against a former officer of the
Bank and have been successful in obtaining
a default judgement against him. Subsequently
the Liquidators initiated action to enforce
their right to various assets owned by the
former officer and are in the process of
pre-trial discovery. The Liquidators hope
to see this matter resolved by the end of
the year.
Intercompany
Claims
• There
are significant intercompany claims filed
in the liquidation of the Bank by its fellow
subsidiary, Gulf Union Bank (Bahamas) Ltd.
Although the Liquidators have rejected these
claims, provisions must be set aside and
maintained until any possibility of a successful
appeal against the rejection disappears.
The Liquidators
continue to be of the view that the final
return to creditors will be in the range of
50% to 60%. The Liquidators distributed in
aggregate approximately US$10 million to the
creditors of the Bank in the first interim
distribution paid on April 20, 2000. The precise
timing and amount of a second interim dividend
is dependent on the Liquidators’ ability
to recover funds from the actions outlined
above.
The Liquidators
continue to act in consultation with the Committee
of Creditors. However, if any creditor has
concerns or questions please do not hesitate
to contact us directly at the listed address.
Yours truly,
Michael
Pilling
Joint Official Liquidator
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