By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The $2.5 million remaining from the sale of its leasehold interests will not be enough to fully compensate City Markets’ creditors, its principal revealed yesterday, adding that by law the company’s former employees were not entitled to receive both their severance pay and pensions.

Describing the $1.4 million settlement offer, which has twice been rejected by the staff, as “a goodwill gesture: by his family, Mark Finlayson told Tribune Business that the Employment Act meant that ex-City Markets workers could only get severance pay or their pension - but not both.

Tribune Business’s review of the 2001 Employment Act backed up Mr Finlayson’s assertion on a point of law that has not been tested before, but could be in the ongoing City Markets’ saga. It applies only to non-contributory pensions, where the company contributes 100 per cent of the payments and the employee nothing.

That is exactly the type of pension plan that was in place at City Markets. And Section 26 (4) of the Employment Act states: “Where an employer provides a gratuity or non-contributory pension for an employee, the employee is not entitled to both redundancy pay and the gratuity or non-contributory pension, but the employee shall select the one which he prefers.”

This adds a new, crucial and unexpected twist, to the fight by City Markets’ employees for both severance pay and pension benefits, suggesting they are only entitled to one.

Meanwhile, disclosing that the sale of City Markets’ leasehold interests in four store sites to Super Value had initially been a $5 million deal, Mr Finlayson told Tribune Business the loss of Harbour Bay had dropped this to $3.5 million.

Out of that sum, he explained that $800,000 had gone to the employee pension fund in selling the Cable Beach store equipment that it owned to Super Value’s Quality Supermarkets, while legal fees and associated transaction costs would further deplete it to around $2.5 million.

That figure, Mr Finlayson told Tribune Business, would not be enough to compensate the employees for all their severance pay, let alone City Markets’ other creditors.

And, confirming that the Finlayson family holding vehicle, which owns 78 per cent of City Markets, was first in the creditor queue due to its $14 million worth of debentures over the company’s assets, Mr Finlayson said the severance pay offers to-date had been “goodwill gestures” by his family.

“There are other people besides the employees that have to be paid in order to clean the slate,” Mr Finlayson said. “There are certain obligations out there that Bahamas Supermarkets intends to meet out of the $3.5 million.

“The pension fund has already had a good part of that. It has already received $800,000 of that by selling the equipment to Mr Roberts in the Cable Beach location, so out of that $3.5 million, there’s going to be coming legal fees and so forth.

“It will end up in the region of $2.5 million, and that’s not enough to meet the obligations to the employees.”

Other creditors include the likes of the Bahamas Electricity Corporation (BEC) also have to be paid from that sum, and Mr Finlayson said all would have to accept a ‘hair cut’ on what was owed to them - that they will not recover 100 per cent.

“My position is that we were going to try to meet our obligations. That’s when there was $5 million in it, and I think it’s more than reasonable for them [the employees] to take a lesser amount,” he added.

Noting that the employees’ rejection had created an impasse, Mr Finlayson told Tribune Business that he and his family had made it “absolutely clear” that City Markets first obligation was to them and Trans-Island Traders.

The Finlayson family had lent money to City Markets, which it acquired in November 2010, which now stood at $14 million plus interest. Mr Finlayson said the money was secured by debentures on the company’s assets, with the debt financing designed to ensure the family’s stake was not diluted or “watered down”.

He then described the employee rejection of the $1.4 million severance pay offer as creating “a problem”, since it was “a goodwill gesture by the Finlayson family”that it did not have to make.

He then disclosed the contents of the Employment Act, and suggested that the former City Markets workers had been badly advised.

“It’s a choice in law between one or the other [severance pay or pension fund], and most employees have made their choice in receiving 20 per cent of their pension obligation,” Mr Finlayson told Tribune Business.

Arguing that the employees would have “been way ahead of what the law requires” had they accepted his family’s $1.4 million offer, Mr Finlayson suggested the protests outside Parliament had been misguided.

“We’ve tried to be more than fair,” he told Tribune Business. “We’ve tried to give people not only what they’re entitled to but what they think they’re entitled to, but so far it’s only generated a negative reaction.”