Globe Trust registered a net loss of $105.8M for the year 2002 and its administrator has reiterated that the institution is bankrupt and needs new investment or postponement of debt to meet its obligations.

The 2002 loss was down from the whopping $505.5M in 2001 and the financially troubled bank continues to operate from its cash flow and not from income or profits.

Conrad Plummer, Admi-nistrator of Globe Trust and Investment Company Limited made these disclosures during the company’s Annual General Meeting (AGM) for 2002 held on Monday at the King Solomon building on Brickdam.

Globe Trust had closed its doors to depositors in July 2001 after which the Bank of Guyana (BoG) took control of it. The BoG then moved to the courts to have the company liquidated but this was denied by the courts in July 2002 and Plummer was subsequently appointed by the BoG to administer the affairs of the company.

According to Plummer, loans and advances for 2002 amounted to $111.8M, down from $195.5M in 2001; while interest income from loans was -$11.6M for 2002 compared to $32.5M in 2001. He said interest from securities plummeted to $784,775 in 2002 from $5.5M in 2001. The company’s net interest deficit stood at $48.6M in 2002 up from $32.2M in 2001.

Salaries and other staff costs, Plummer explained, were cut by almost half in 2002 to $27.9M from $47.8M in 2001, while other expenses for 2002 were $30.2M compared with $487.6M in 2001. Based on the company’s annual report, staff reductions in 2002 accounted for the vast drop in staff expenses. There were three resignations, five terminations and one death. An additional two persons were recruited.

Share capital remained constant for 2001 and 2002 at $262.2M while accumulated losses increased to $845.3M in 2002 from $739.5M in 2001. The shareholders deficit rose to $550.1M in 2002 from $447.8M in 2001.

Plummer reported that the company is bankrupt and in order for its obligations to be met, there must be a postponement of some of its debt, an injection of new investment and a conversion of some of its debt into equity.

He called the recommendations the tenets on which a sound reorganisation plan will be built. He said that investment into the company may be by way of equity, which is preferable, or by way of some form of subordinated debt or bond issue. He said that these areas will be investigated and pursued.

The only services offered during the year 2002 were trust services and debt recovery, Plummer said.

He noted that there were a number of legal actions involving the company, the majority of which resulted from the debt recovery process as Globe Trust took steps to realise the collateral held on delinquent loans. As at June 30, 2003, 65% of the loan portfolio was at various stages within the legal process.

Commercial court

He explained that in the process of debt recovery duties it is not uncommon for the staff to be informed by delinquent borrowers that the threat of court action is no threat at all, since the borrowers do not expect such actions to materialise in any timely manner. “We take this opportunity to lend our voice to those others in the financial sector who have been advocating the setting up of a commercial court and have been advocating a speedier but just process which will allow for the realisation and liquidation of collateral security”, Plum-mer said.

He noted too that the legal actions brought against Globe Trust will have some bearing on the company. The action in question is one brought by 26 staff members in 2002 for a determination on the pension scheme and to have the funds distributed to them. These funds, Plummer reported, are made up of the contributions of the 26 employees, the company contributions for them with interest, the contributions of those staff members who had left the company before and the company contributions with interest.

“If the total funds in the scheme were to be distributed, this will undoubtedly affect Globe Trust’s cash flow in addition to diverting resources which would otherwise have gone towards enhancing shareholder value or paying some of the depositors,” Plummer said.

In giving an account of the company’s financial performance, Plummer stated that reduced interest income from securities and investments reflect the decline in rates in the marketplace and the volatility of these investments given Globe Trust’s needs to constantly manage its cash flow.

He said too that the loss of income from loans and advances resulted mainly from interest adjustments made to various accounts and the majority of these adjustments pertained to prior periods for which incorrect computations were made or the incorrect interest rate used.

He noted too that in an effort to control expenses, interest rates on deposits were lowered to market rates, but despite the reduction, a loss of $105.8M was still recorded. He made the point too that the institution could not offer an interest rate which it knew was not sustainable. Assets, Plummer reported, were reduced by $77M or 32% to $245.6M. He said that during the period of September to December of 2002, an effort was made to build up cash and investments, from which repayment of the company’s liability would come.

This, he said, was moderately successful as an additional $15.6M was held for investment.