The Cayman-based Consolidated Water has reached a deal to sell its Belize branch, CW-Belize, to Belize Water Services Ltd. for US$7 million, with the closing of the transaction expected to take place by Wednesday.
The US$7 million sale price will be adjusted by the amount of all unpaid invoices payable by Belize Water Services Ltd. to CW-Belize for water sold through Dec. 31, by the amount of cash held by CW-Belize as of the closing of the transaction, and by the amount of CW-Belize’s consumables inventory at Dec. 31, according to the agreement.
Further, before the closing of the transaction, CW-Belize will forgive approximately US$1.8 million of intercompany debt owed to CW-Belize by Consolidated Water and its other subsidiaries.
Along with those conditions, the agreement also includes a memorandum of understanding that Belize Water Services will help Consolidated Water repatriate its cash from Belize. A major reason for the sale has been Consolidated Water’s difficulties in repatriating profits from there, according to filings with the United States Securities and Exchange Commission.
Consolidated Water – which is headquartered in Cayman and also operates in Belize, the British Virgin Islands, the Bahamas and Indonesia – has explained in public filings that repatriating profits requires the approval of the Central Bank of Belize, and is dependent on the amount of U.S. dollars available to Belize banks to execute such transfers. Rising interest rates in the U.S. have contributed to U.S. dollar shortages in emerging markets throughout the world.
“Weakness in the Belize economy and other factors have reduced the amount of United States dollars that Belize banks have available for transfer, which limited in the past the amount of funds the Company was able to receive from CW-Belize,” Consolidated Water explained in a filing this week. “The Company’s repatriations of funds from CW-Belize amounted to $458,000 and $400,000 for the years ended Dec. 31, 2017 and 2016, respectively, which is significantly less than the net income and net cash flows CW-Belize generated for those years.”
With Belize Water Services’ assistance, Consolidated Water stated that is has been able to repatriate about US$2.75 million in cash from there to its bank accounts in Cayman during the third quarter of 2018, and an additional US$1 million from Sept. 30 to the beginning of 2019.
“The Company anticipates repatriating approximately an additional $1.05 million from Belize between the date of this report and the closing of the Transaction,” the company added.
Consolidated Water plans to use the proceeds to fund organic growth projects in its other existing markets, as well as new projects and potential acquisitions in new and developing markets, according to its CEO, Rick McTaggart.
The Belize government helped facilitate the transaction, according to media there. An Oct. 1 report from Channel 5 Belize states that the country’s government has approved a sovereign guaranty for a proposed loan from the Caribbean Development Bank of $17 million Belize dollars (US$8.5 million) to, among other things, acquire all the shares of Consolidated Water’s Belize operations.