Lazare Kaplan presses ahead with US$333m facility

Brian Benza
Staff Writer | Friday September 17, 2010 00:00

 

This week, the international media was awash with reports that LKB's parent company, Lazare Kaplan International's future was uncertain following its latest filing to the USA's Securities and Exchange Commission (SEC) in which the company said that it was unsure whether it would be continuing to operate.

In an interview in Gaborone this week, managing director of LKB, Alfred Dube, quashed reports that his company is in financial distress, saying it was business as usual at LKB and all of its subsidiaries around the world.

 'I don't know where all these reports are coming from, but I can certainly tell you that all our operations are running very well except for the incident surrounding collectability and recovery of certain assets. But that should not put us out of business. We are very strong in terms of liquidity and assets,' he said.

The diamond company's report to the SEC dated 31 August 2010, said that it anticipated net sales of US$152.4 million for 2010, a decrease of 20.8 percent from 2009.

LKB said that while the diamond industry was experiencing economic recovery, the company remained affected by the ongoing economic fragility.

Commenting on the US$333 million Overseas Private Investment Corporation (OPIC) facility which was supposed to be in place 10 months ago, Dube said they are currently in negotiations with the Ministry of Minerals, Energy and Water Resources and other banks for the facility to be put in place but no time frames have been set.

When it was mooted a few years ago, the facility was a US$250 million Overseas Private Investment Corporation (OPIC) guarantee plus US$83 million from the participating bank, ABN AMRO, which was meant to finance Botswana's 16 diamond-cutting and polishing companies.

OPIC is a US government agency whose mission is to mobilise and facilitate the participation of United States private capital and skills in the economic and social development of less developed countries in transition from non-market to market economies. LKB is the participating sponsor in the agreement because it is an American company.

However, it seems relations have soured between ABN AMRO and LKB, with Dube saying they are talking to other banks for the facility to go ahead and they have not been in contact with ABN AMRO for months.

'Of course we can never rule out putting the facility together with ABN AMRO in the future if they sort out their issues with OPIC, but at the moment we are talking to other banks and OPIC so that we can move as quickly as possible,' said Dube.

 The recent troubles of ABN AMRO Bank NV, now known as the Royal Bank of Scotland, with the USA Justice Department, have also not helped the situation. In May this year, the company agreed to forfeit US$500 million to settle charges after it was charged with one count of violating the Bank Secrecy Act and one count of conspiracy to defraud the United States, violating the International Emergency Economic Powers and the Trading with the Enemy Acts.

In an interview with Business Week in Gaborone a few months ago, the chief executive officer of the International Diamond and Jewellery Group of ABN AMRO Bank, Victor van der Kwast, said they should have signed the agreement for the facility in November last year, falling short of blaming LKB's financial troubles for the delay.

Describing the situation as disappointing, van der Kwast, said they were preparing to approach OPIC to discuss the way forward. 'We have kept our promise, opened an office and staffed it and look forward to start rolling with this project because this is one of the reasons we opened an office here (in Gaborone),' he said, suggesting that they will go ahead without LKB. Dube laughed off the suggestions that ABN AMRO can go ahead with the facility without LKB saying much progress has already been covered in their negotiations with the OPIC and the Ministry of Minerals, Energy and Water Resources.