NICA SHOULD NOT BE LIQUIDATED

Dear Sir,

We promised in our last letter to address the option of liquidating NICA and to present reasons why this option is not favourable for NICA and its shareholders.

It is well known that a group of dissatisfied NICA shareholders has been vigourously seeking to have NICA liquidated. They have been quite public and personal in their attacks and criticisms of past boards of directors and others who have given of their time and effort without any thought for compensation to try and set NICA on a positive footing. They have said little about the pros and cons of liquidation.

The pro-liquidation group of concerned shareholders, despite all they have been stating over the past months, have not explained to shareholders and the public at large, why in their view, liquidation is the best option for NICA. They have not discussed the advantages and disadvantages of liquidation. We take this opportunity to show why we think NICA should not be liquidated.

Liquidation of NICA would involve the court appointing a liquidator, that is an official who takes over NICA’s affairs, determines what it owes and what it owns, sells its assets and pays off its debts, meets the costs of the liquidation and distributes the cash if any, that is left over to shareholders. The liquidator winds up the Company and NICA ceases to be. It becomes history.

The winding up of a company means closing its operations and ending its registration in the Companies Register. It ceases to exist. Liquidation is an extreme action used as a last resort, when no other option that is less extreme can be implemented. It is mainly used when a company is bankrupt, that is, its debts exceed its assets. This is not the case with NICA. Far from it! NICA is in very good shape at this time, with much potential for positive growth in the future.

NICA has no debts. All of its debts have been paid off. So the liquidator will have no work to do in this regard. NICA has significant assets comprised of 38.75 acres of undeveloped land, a factory building on a 0.75 acre lot of land in Sandy Ground, rented to Anguilla Rums for about ten years, shares in five companies in Anguilla and the Caribbean that pay dividends and investments in US companies’ stocks, shares and bonds and US Treasury bonds. NICA’s cash was reduced to pay off the outstanding debts. The amount of free cash it owns presently is limited. These assets run into the millions of dollars. They belong to NICA’s shareholders. The Company is generating cash in rents and dividends exceeding $250,000 annually, and without having to employ staff. NICA is not facing a financial crisis at this time. There is no failing business operation that needs to be brought to an end urgently.

A liquidator would preside over the rapid sell off of NICA’s assets in order to generate cash, when the company is generating cash to meet its administrative costs that amount at this time to a few thousand dollars a year. The cash that would be obtained from the asset sale would be used firstly to pay the liquidator, the professionals such as an accountant, legal counsel, auditor, valuer and surveyor hired to provide their services to the liquidator and the administrative staff that the liquidator will need to employ to support the management of the liquidation.

The sell off of NICA’s assets would need to be completed within as short a time as possible and the company wound up and crossed off from the register. The liquidator most likely would be given a short time limit in which to complete the process. Therefore the sale of the assets would be taking place under great pressure. This would result in the assets being sold off at prices that are less than market prices and most likely a lot less. Put another way, the liquidator would be under severe pressure to sell NICA’s assets at big discounts and to wrap up the liquidation as quickly as possible.

So here is the picture. The assets are sold off at a big discounts, a significant amount of the cash obtained from the asset sale is used to pay the liquidator, staff and independent contractors and the other costs of the liquidation. The remaining cash is calculated and distributed to shareholders in proportion to the shares they hold in NICA. The entire process is likely to take two or more years. Shareholders take the cash and do whatsoever they will with it. The opportunity for NICA to be turned around and become an active and significant player going forward and benefit from the growth that Anguilla now enjoys would be destroyed. A great opportunity to remake NICA into what its founders envisioned for it and to finally generate appreciation in the value of the shares over the long term, would be lost.

Should the liquidation option be chosen by shareholders and the process started, there would be no turning back from it. The process would have to be followed through to its conclusion – the death of NICA, when it is not terminally ill. There would be no second chance to try another option.

This is not the case with the other options that have been proposed and which are being considered by NICA’s Board of Directors, options that would enable NICA finally to realize its potential and justify the positive response of shareholders to the Company’s vision for playing a significant role in Anguilla’s development.

There have been few liquidations of companies operating in the Anguilla market. Such as there have been, these liquidations have dragged on, while the prices for the assets fell over time. The costs of the liquidations skyrocketed and at the end of the day, the shareholders gained little and lost much of what they had hoped to gain. The market value of the assets shrunk during liquidation. The assets realized only a fraction of the cash that they should have fetched under normal market conditions, where there was no pressure to make quick asset sales.

NICA does not have the symptoms of a bankrupt and severely distressed company that would justify liquidating it. We have shown that liquidation has major disadvantages:

i) it results in the sell off of the assets at bargain discount prices to buyers, significantly less than their market value and realizing in cash much less than the assets are worth;
ii) once liquidation is commenced, there is no turning back;
iii) the process is prolonged as potential purchasers of the assets play the waiting game, putting pressure on the liquidator to lower the prices;
iv) the costs of liquidation skyrockets over time as the process is drawn out; and
v) liquidation would promote the psychology of failure and strengthen the negative notion that Anguillians cannot make a success of a start up widely held company, despite the evidence to the contrary as seen in such successful public broad based companies as MAICO, NBA, CCB, Anglec, Anguilla Mortgage Company.

What are the advantages of liquidation for NICA and its shareholders? Frankly there are no advantages at this time, since NICA is not bankrupt, is debt free, has a modest cash flow, and has a net asset value - net worth – in the millions of dollars. Why should the company be liquidated at this time? This is a time when the opportunities for the Company to find capable strategic allies are at their most favourable. Shareholders wishing to sell their shares will soon have a mechanism available to them to do so. There is no need to destroy NICA as a whole and set back the process of empowerment of the Anguillian community. Liquidation is an option that should be avoided for as long as possible. It is a last resort option, when there is no other option left. NICA is far from such a position. So why liquidate now, when matters have improved to their most favourable for NICA.

The future is positive for NICA. The Board is diligently seeking to create an over the counter system to enable shareholders wishing to do so to sell their shares. It is also seeking to find a strategic investment partner to purchase a controlling interest in NICA and take the Company forward to realize its potential and become a successful Anguillian company that all of us can be proud of in the long run.

The Board is started on having the register of shareholders updated. It is addressing the preparation of an up to date balance sheet that will show the current book value of the Company. The Board is preparing to come to shareholders in the near future to give them the opportunity to decide which way they wish NICA to go: for NICA to be liquidated or for NICA to be transformed into a vibrant operating company by the injection of fresh energy and business savvy and additional capital by attracting a strategic Anguillian investor or group to buy control and develop its real estate assets.

The Board needs to be given more time to address all of these matters. They need shareholders support, cooperation and understanding, for despite all the negativity of the past, NICA has been brought today to a good place positioned to experience a positive future, once the right decisions are taken by shareholders on the Company’s future.

Next time, we will consider the moderate, positive and practical options of setting up an over the counter mechanism for the sale of NICA’s shares and of searching for and attracting a strategic Anguillian investor or investor group to purchase a controlling interest in the Company and grow it.

NICA should not be liquidated. NICA should be elevated.

Thank you.

NICA Supporter

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