iCreate shareholders facing lawsuit
VM Investments goes to court to recover $500m in unpaid loans
THE top shareholders of the embattled iCreate Group are facing new challenges, this time relating to three lawsuits filed in the Supreme Court by VM Investments aiming to recoup half-a-billion dollars it said is outstanding in unpaid loans. VM Investments filed the suit to recover the sum in the Supreme Court on January 23. News of this suit comes just days after iCreate itself said it will sue Sagicor Investments for damages related to the period during which it was put into receivership recently.
Those being sued by VM Investments are businessman Kevin Frith and the firms AHL (SPV), Kintyre Holdings and eMedia Interactive Group. VM Investments in the suits said the parties were signatories to the loans and are in breach of the loan agreements having failed and/or refused to repay all the sums owing. The total sum being sought in the suits is $504.58 million. The investment house said it decided to file the suit after receiving no responses to an October 19 letter to all parties about the respective loan agreements that have not been serviced since the first interest payment dates.
When the Jamaica Observer contacted Kintyre Holdings chairman and eMedia director Tyrone Wilson regarding the legal actions, Wilson responded, “I was made aware of the suit via social media. I was not aware prior because discussions were ongoing with VM. My partners are in discussion, and we expect an amicable resolution in short order.”
Frith also responded that his attorney Denise Kitson is handling the matter and that he wouldn’t give any additional comment. A response from VM Investments CEO Rezworth Burchenson was pending up to press time. Wilson’s associated companies are being represented by Georgia Gibson Henlin KC, while VM is being represented by Symone Mayhew KC of Mayhew Law.
VM Investments in its suits said the parties borrowed various sums using shares in iCreate as the collateral for the loans, a product called margin loans in the financial sector. Within a margin loan arrangement, individuals and/or companies can borrow monies against some financial asset that is used as collateral for the loan. The available amount that can be borrowed is dependent on the asset being used as collateral. In some cases, a person or entity can get up to 100 per cent of the value of the collateral to borrow while in other cases, only a percentage of the value of the asset can be borrowed.
In one of the three cases, VM Investments is seeking recourse for a total of $181.47 million that it said is owing in relation to two loans to Kintyre Holdings. One of those two loans was for $53.13 million and had interest outstanding of $11.78 million. The second loan was for $100 million with interest outstanding of $16.56 million at the end of 2023. The two loans were accessed in August and December 2022. They had 179,516,129 shares of iCreate pledged as collateral with a then value of $418.78 million. The second loan currently accrues daily interest of $47,638.07 based on a 15.5 per cent interest rate.
In a second suit, VM is seeking to recover $117.50 million in principal payments and $25.55 million in overdue interest from eMedia. This loan was accessed in mid-2022 by the company which pledged 100 million iCreate shares at a valuation of $322 million as the collateral for the loan. This particular loan accrues daily interest of $58,436.24.
Then in a third suit, VM is seeking to recover $180.06 million against AHL (SPV), Frith and Kintyre. The loan which is composed of $155 million in principal and $25.06 million in overdue interest, was disbursed in December 2022 with 240 million iCreate shares at a valuation of $427.20 million. The loan accrues daily interest of $47,638.07 and is secured by a corporate guarantee from Kintyre and a personal guarantee from Frith. All three suits were signed by Burchenson.
All of these overdue loans represent a sizeable sum for the publicly listed company. VM’s loan portfolio was worth $5.22 billion in September 2023.
Wilson is the founder, chairman and CEO of iCreate, a company listed on the Jamaica Stock Exchange (JSE). Companies Office of Jamaica (COJ) records revealed that Wilson is the sole owner of Kintyre with Meisha-Gay Mattis as the other director of the company. Wilson is the largest shareholder and only director of eMedia, whose company secretary is Mattis. AHL’s (SPV) sole director is Frith with attorney-at-law Able Don-Foote no longer being a director since December 2022. Although Don-Foote’s Astronomical Holdings is listed as the only shareholder of AHL (SPV) by COJ records, a February 2023 post on Frith’s
LinkedIn account revealed that he purchased AHL (SPV) from Don-Foote and that he had a 10 per cent stake in iCreate.
Further implications
Kintyre is currently the largest iCreate shareholder with a 41.87 per cent stake while eMedia and AHL (SPV) each own 10 per cent, bringing the total ownership interest up to 62.93 per cent or 597.64 million ordinary shares. If VM Investments was to seize the 520 million iCreate shares pledged, the investment firm would become the largest shareholder with a 54.75 per cent interest and trigger a change of control of the business under JSE rules.
iCreate had originally sought to purchase Visual Vibe in June 2022 which it intended to pay for with the proceeds from a planned rights issue. However, this move was scrapped, with the company seeking instead to raise convertible debt in November 2022 to pay for the transaction. AHL (SPV) provided $100 million for the transaction with a conversion price of $1 per share, and Kintyre contributing US$375,000 or $57.36 million. Along with the JPS Pension Fund contributing $70 million, five other individuals were to have put forward $98 million for the transaction.
Visual Vibe was eventually acquired in May 2023 for $588.61 million or US$4.27 million, with iCreate assuming $78.77 million in net assets and recognising $509.85 million in goodwill. It was announced in December that iCreate had sold 30 per cent of its interest in Visual Vibe before it had a board meeting to consider spinning off Visual Vibe to iCreate’s shareholders. iCreate’s total assets were $700 million in September with the company having $375 million in total liabilities and $325.01 million in equity.
Dequity Capital Management and Sagicor Investments sold shares in the fourth quarter with a connected party of iCreate selling shares in the last three days of 2023. iCreate’s shares have been suspended from trading on the JSE since January 18, due to breaches of the rules, when the shares last traded at $0.41 worth $389.37 million.
Sagicor Investments terminated its receivership against iCreate on January 31 before Wilson announced the intention to sue the company for the impact the move had on the business. However, it’s unknown how this lawsuit by VM Investments will impact this planned action. This lawsuit also begs the question of whether there are other listed companies whose majority owners have pledged shares and are not servicing their debts.