Home' Trinidad and Tobago Guardian : June 23rd 2016 Contents BG6 NEWS
BUSINESS GUARDIAN www.guardian.co.tt JUNE 23 • 2016
Local contractors who say they
have been waiting, in some cases,
for more than five years for out-
standing monies owed to them
now have an option to sell their
invoices to a financial institution.
Investment bank NCB Global Finance
(NCBGF) is now offering to buy out contractors
invoices at a discounted price.
NCBGF CEO Angus Young told the GML
Enterprise Desk that, in order to benefit, con-
tractors must satisfy criteria set by the financial
institution. The objective, he said, is to present
the contractors with a "viable option to keep
their businesses going."
Young said the contractor can sell the receiv-
able owed to him by the government or gov-
ernment statutory body. The bank performs
due diligence to ensure that the invoice presented
is true and correct, and that it is acknowledged
and certified by the State or an entity of the
Once that is done, Young said, the State or
the state entity then has to "acknowledge that
we are purchasing the invoice, so that when
they are making the payment, they make it
directly to the financial institution as opposed
to the contractor and, in so doing, we mitigate
the risk of the funds going elsewhere."
Young said: "If you have run your business
properly and you can stand behind your per-
formance and your invoices, there is an alter-
native. You don t necessarily have to close your
shop and send people home. We can help fund
the mobilisation of other projects by buying
these invoices from you."
Young made it clear that NCBGF cannot buy
out the entire debt of the estimated $2 billion
that is owed to contractors. "That is way too
much," he said, as the Financial Institutions Act
places a limit on the amount of credit borrowing
to which a company can engage.
Young said the offer has been made because
contractors should not have to wait for any
inordinate length of time for payment because
"very often when you have receivables out to
the government, what you are doing is funding
the government and contractors are not in that
business. They are into building. It is financial
institutions, like us, that fund borrowers and
the government. We are in a better position to
sit and wait and we comfortable with the credit
risk of the government."
Young said he had sent a memo to the pres-
ident of the T&T Contractors Association, Mikey
Joseph, offering the invoice factoring and they
have disseminated the information to their
Joseph confirmed receipt of the memo from
Young sent last December. He said it had been
passed to contractors who are members of the
association but Joseph said it was up to individual
contractors to determine "whether they want
to sell their debt for a percentage of what is
owed to them."
Joseph argued that the offer "could bring a
lot of relief to persons with pressing financial
needs but the individual would have to determine
if they can accept being owed $1 million and
getting $700,000 or $800,000 in hand to keep
operations going. It is a risk they have to analyse,"
Joseph added that this was not new as, in
the past, some contractors had utilised that
option of selling their debt to other financial
Angus Young is the brother of Stuart Young,
Minister in the Office of the Attorney General
and Legal Affairs.
When asked whether he felt there may be a
conflict of interest, given that the CEO of the
institution offering the buy out of debts has
links to a senior government minister, Joseph
said: "There is no conflict. Trinidad is too small
for us to be worrying about who is providing
a service. All I care about is that the business
is legal and legitimate."
Joseph said what is required is "proper pro-
curement legislation and rules and laws to ensure
Young also dismissed any notion of a conflict
saying: "Absolutely not. I see no connection.
People can get this product at any licensed insti-
Contractors split on offer
Some of the contractors who spoke to the
GML Enterprise Desk were divided on the offer.
Kelly Mohammed, a medium-sized contractor
from Rio Claro, said: "I prefer to wait. You will
lose money when they buy out your debt. They
want to take 20 to 25 per cent of your debt,
that s how they make their money."
Mohammed said he has confidence that the
debt owed to him and other contractors will be
paid "in the next few months."
Another contractor who did not want to be
identified had similar sentiments. He prefered
to wait, "in any case the construction sector is
now at a standstill, nothing is happening."
The contractor divulged that he is owed mil-
lions and has had to reduce his operation and
send some staff home. But he remains confident
he will get paid.
Another medium-sized contractor, who also
did not wish to be identified, said: "I will grab
that because I don t know how long I will have
to wait for payment from the Government and
what their terms of the payment will be."
The contractor felt the idea being put forward
by NCBGF was an "excellent one which would
get a lot of traction."
A large contractor owed millions by the State,
who also wished to remain anonymous, said:
"It s a very interesting idea. It could be very
tempting given the time we waiting for our
money. I would consider it."
But he also remains optimistic that audits
being done will clear the way for many con-
tractors owed money to be paid.
Young said there has been interest from con-
tractors and, in some cases, invoices had already
been purchased but he did not want to go into
detail on the basis of "client confidentiality."
"Obviously we have gotten a lot more inter-
ested parties than deals we have done, meaning
you have to get through the due diligence first."
In some instances, Young said, the invoice
obligor (the Government or state entity) is unwill-
ing to acknowledge the invoices or unwilling to
acknowledge the assignment of the said invoice
to the institution, so that becomes a problem.
"However, we have had recent experience where
all levels of due diligence have passed with flying
colours and we have gone ahead and purchased
invoices and all has been well thus far."
The system, he said, could really only work
when the invoices are legitimate, so "of the $2
billion owed, how many of those contracts are
kosher---so to speak---that can pass the scrutiny
of our due diligence process and get the blessings
of the invoice obligor; that is what it comes
So, what is the process for the contractors to
benefit from invoice factoring?
Young explained that NCBGF requires that
the contractor must meet several requirements
• a validated and interim payment certificate;
• the invoice must not be subject to any audit
• the state agency must formally acknowledge
that there are no outstanding issues where con-
tractual obligations are concerned;
• the invoice obligor must formally acknowl-
edge that the invoice is being assigned to NCBGF
and that settlement must be paid directly to
• NCBGF must first receive the requisite
approvals from its risk committee and or board
of directors before the process can move for-
Young said, typically, the process is completed
within ten business days, once all the conditions
"This product should not be viewed as a tool
to mitigate the risk of default or to transfer the
risk of none payment. This is a working capital
tool where people would rather take, let s say,
90 cents on the dollar today and go about mobil-
ising for another project, or keep their shops
going, than to sit and wait for 100 cents from
the Government some time in the future."
Using a hypothetical debt of $10 million owed
to the contractor and once all the conditions
are met, Young said: "We would put aside 10
per cent retention, that is, the contractors
money, but I would hold it pending the gov-
ernment payment. Then we looking at a debt
of $9 million. I would discount it for the period
of time, whatever we negotiate with the con-
tractor at a specific rate. When we discount
that $9 million, the proceeds will be that dis-
counted value. Let s say that comes up to $8.5
million, I will pay that cash and I will sit and
wait for the $10 million to come in from the
It is only if the Government pays within a
stipulated 180 days that the contractor would
receive a full refund of the invoice retention or
the $ 1 million, in the example. If the payment
is not made within the stipulated time, Young
said "a default interest rate kicks in and it carves
away at the retention we are holding."
So, what happens if the retention is exhausted
and the Government still has not paid the out-
• Nipdec: $600M
• HDC: $600M
• EFCL: $800M
• Pure programme:
hundreds of millions
GML ENTERPRISE DESK
NCB Global Finance Ltd is a non-bank fi-
nancial institution licensed and regulated
by the Central Bank. It is domiciled in
Trinidad as part of the NCB group of com-
panies which includes the National Com-
mercial Bank of Jamaica Ltd, the largest
commercial bank in Jamaica.
NCBGF represents the financial serv-
ices hub for the NCB group in T&T, and in
the Southern and Dutch Caribbean,
Guyana and Suriname.
Continued on Page 7
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