Woodrow Mitchell, managing director of Walkerswood, was unwilling to speak about the deal. - File

A consortium of Jamaican firms, led by Ian Garbutt's Associated Manufacturers, is offering to pay creditors of Walkerswood 25 cents on the dollar on its more than J$1 billion debt, under a court-approved scheme which, if accepted, could save the manufacturer of spices and condiments from utter collapse.

If the deal goes through, Walkerswood will be merged with Associated Manufacturers, which produces the Busha Browne and Jamaica Joe brands of condiments.

However, the Walkerswood brand would remain in production at its modern 42,000-square foot plant in WalkersWood, St Ann, opened only three years ago.

"We are writing to every creditor to invite them to a meeting to make an offer - a percentage of what is owed to them," said Garbutt, whose major partner in the arrangement is Pan Jamaican Investment Trust (PanJam), the Facey family-controlled conglomerate, which once owned the Busha Browne brand.

"We are hopeful that good sense will prevail," said Garbutt.

Scheme sanctioned

With a high court judge having already sanctioned the scheme and given the green light to proceed, Garbutt hopes to bring the creditors together by the end of January to vote on the deal.

The consortium will pump as much as US$8 million into the company - US$4 million of which will go directly into Walkerswood's operation.

The other US$4 million will go, substantially, to paying off creditors, who Garbutt estimates are owed US$14 million. Among the largest of these is National Commercial Bank, which in early 2005 made two loans to Walkerswood Partners which has majority control of Walkerswood Caribbean Foods Limited - one for US$1.8 million and the other for J$29 million - to help finance its new plant, modernise its facilities and streamline its operations.

Woodrow Mitchell, Walkerswood's managing director, and one of the company's dozen founding shareholders, declined comment on the deal with Garbutt's group, which would see the current owners relinquish control, once creditors endorse the arrangement.

Original promoters control

Based on the latest available information, the original promoters of the business control Walkerswood Partners, which in turn owns approximately 80 per cent of Walkerswood Caribbean Foods, the production arm.

The latter company controls two marketing entities, including Walkerswood Marketing Limited.

Walkerswood's current problems represent a significant reversal for the company, which grew out of a small community venture in the 1970s in rural Jamaica to a business with sales of approximately US$5 million a year. The company has carefully managed its reputation for maintaining and promoting rural links and as an example of backward and forward integration between an agro-processing and marketing operation and farmers who grow the spices required for its products.

In 2006, with its finances in trouble and unable to properly meet credit obligations, Walkerswood's sales slumped 80 per cent. In fact, production has been halted for several months.

Little-used element

The path that the owners have now agreed in this effort to rescue the Walkerswood brand is a little-used element of Jamaica's company law that allows firms to re-organise in a fashion roughly analogous to America's Chapter 11 bankruptcy protection.

It allows troubled companies to approach the court with a reorganisation plan that includes offering pennies on the dollar to holders of their debt.

If creditors accept, it allows the company to keep trading rather than being liquidated. This is a benefit to creditors in circumstances where they are likely to get more of what they are owed upfront than would be the case if the assets are liquidated.

For such schemes to go through, the repayment offer has to be accepted by at least 50 per cent of creditors, representing 75 per cent of the debt obligations.

Perhaps the most high-profile use in Jamaica so far of this route to corporate reorganisation was its employment in the late 1990s by the Mechala Group.

Difficult to repay

Having raised US$100 million on the US bond market and used it to write down high-cost Jamaican dollar debt, Mechala found it difficult to repay the bond. It eventually settled with its creditors at 47 cents to the dollar, which was more than it initially offered.

Neither court documents nor the financial analyses of of Walkerswood which formed the bases of restructuring plan were immediately available, but Garbutt said that the situation regarding creditors was "a fairly entangled legal web".

"We are not buying but rather trying to rescue the company," Garbutt said. "We want to ensure that the factory remains open, as Walkerswood is a wonderful brand."

If the consortium's offer is accepted at the end of January, Garbutt believes that Walkerswood could be back in operation by March.

"Hopefully, this offer will be accepted; if not, we will have to walk away because we can't do any better, given the conditions that now exist and higher interest rate," he said.

sabrina.gordon@gleanerjm.com

An array of Walkerswood spices. - File