The first article in this series set out the background to these proposed bonds and the implications of the HDC’s perennial problem with bad property titles.  The second drew parallels between these proposals and the roots of the 2008 Wall Street crash, with some references to Jamaica’s National Housing Trust and its contribution system as an alternative for financing affordable housing.  This week I conclude by delving into the heart of the matter, the HDC’s finances and its performance in terms of its existing bond portfolio.

One of my persistent complaints against many of our State Agencies, including the HDC, is the long-term failure or refusal to publish proper audited accounts as required by laws and regulations.  nha-hdc-logoI am pleased to report that my requests for NHA/HDC financial statements from 2003 to 2018 were satisfied in April this year.  Once again, I thank the exemplary officers at the HDC for their assistance.  Even if this time I had to engage my attorney to send HDC a pre-action protocol letter before the financial statements were released and what is more, they have not refunded my legal fees.

Those financial statements are for the NHA from 2003 to 2005 and the HDC after 2005.  This article is focused on these proposed bonds so the first point to raise is the status of those financial statements.

HDC stated that the financial statements for 2003 to 2009 were audited to which I took an immediate objection.  Those financial statements were accompanied by Independent Auditors Reports, issued by KPMG Chartered Accountants, every one of which was subject to a Disclaimer of Opinion.

When there is limited area of inadequate or doubtful information, an auditor has the duty to issue a qualified opinion.  That is called a qualified audit and it warns  those who might place reliance upon it such as regulators, investors and lenders.  In the financial world, a qualified audit is seen as a grave matter, since it speaks to the poor quality of elementary record-keeping and accountability in an industry which is based on confidence.

The Disclaimer of Opinion is many times worse than a mere qualified audit since it means that the auditor has so little confidence in the records that it is impossible to form a responsible professional opinion.

This is KPMG’s final paragraph in each of its seven Independent Auditors Reports for the period 2003 to 2009 –

“…Disclaimer of Opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements…”

When I challenged the HDC on this issue, the firm position was taken that the financial statements had been audited.  It seems that KPMG’s signed Reports were being conveniently interpreted.  In no way can audits which result in Disclaimers of Opinion be regarded as proper or satisfactory.  I would like to see what our financial analysts make of this issue.

T&T Securities and Exchange Commission

SEC-Logo-3The HDC has raised substantial capital via bond issues in which investors lend their money for a set period of time in return for a fixed interest rate (see below). Those bonds are investment instruments under the regulation of the T&T Securities and Exchange Commission (TTSEC).

HDC’s bonds in issue

Date of Registration Tenor Rate Principal value
28-Jan-2009 15 years 8.25% $500,000,000
08-Sep-2008 15 years 8.70% $700,000,000
$1,390,000,000 issued in 3 Tranches
17-Aug-2005 20 years 7.00% $306,000,000
12-Dec-2005 25 years 7.75% $400,000,000
10-Oct-2006 15 years 8.50% $475,000,000

Source – T&T Securities and Exchange Commission (15th April 2016)

The HDC has had four TTSEC Orders against it in respect of Contraventions of the Securities Industry Act 1995 and the Securities Industry Byelaws 1997 in relation to its failure to publish its accounts.

The TTSEC informed me that each continuing Contravention of its rules attracts daily fines of $1,000. It is clear, from the Financial Statements provided, that HDC remains in breach, so how much does it owe in TTSEC fines?

HDC’s fines paid & due to TTSEC for its failure or refusal to file Financial Statements

Date Original Fines Continuing fines as at 23rd October 2019
19 March 2010 $121,400 $3,497,000
25 July 2011 $400,000 $3,013,000
30 October 2016 $92,000 $1,088,000
22 November 2018 $641,200 $335,000
TOTALS $1,254,600 $7,933,000

Source – TTSEC website

My estimate, based on TTSEC’s information, is that HDC owes a further $7.933M in fines due to its failure or refusal to publish proper audited accounts as required by law.  It is very important, given the proposed HDC bond issue, that the public be informed as to whether and when those huge fines are both levied and paid as required by law. The TTSEC must now issue a statement at this critical stage for the guidance of both prospective investors and taxpayers.

I am interested to see how our financial analysts deal with this important aspect of these proposed bonds.

A final overview is useful as the fresh funds to be raised via the proposed 4.5% tax-free bonds could be used in two ways, either to retire some of the existing, higher-interest bond obligations or to fund sales of those previously unsaleable homes.  A proper decision matrix would consider both possibilities to determine the best use of those funds.


2 thoughts on “Property Matters – HDC Housing Bonds Part Three

  1. Taxpayers money should NOT be used to pay errant fines caused by the administrative incompetence of highly paid directors and others whose qualifications outfit them to create viability. If directions or a lack of them from ministers or others create these debts, then those seniors must be held accountable and they must be made to pay the full costs involved. Junior staff have standard salary deductions for petty cash shortages and other minor miscalculations whether done consciously or erroneously. Why is the persistent looting of state funds be further exacerbated by exhausting the treasury and worse indemnifying future generations to their repayments?
    If this is standard capitalistic practice then it systematically impoverishes the masses.

  2. Greetings on the Festival of Lights. Can you give the current market value of 60 acres on land in St Ann’s please. A hospital is on the property but it’s dollar value is not important. Property has been on the radar by at least 1% .

    Sent from my iPad


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.