Money laundering scandal costs Tocumen millions

TOCUMEN, S.A. which operates Panama’s international airport, dubbed the Hub of the Americas has taken  a double financial hit from the Waked family scandal and is  seeking  to end the relationship with one of its main clients the Wisa Group accused by the United States of running  a money laundering network

A bond issue to pay for the airport’s expansion was put on hold this week, and the new offer for less money will cost more as it will include  a higher interest rate for puchasers.  “We are acting in a proactive and transparent manner with the authorities” said the prospectus for a new issue.

As, so far  there,   has been  no charge on the group in Panama, , the termination of the contract would not have legal ground.

On Thursday May 12,Tocumen, SA, relaunched the bond issue

seeking funds to complete construction of terminal, T2.

On  Tuesday an offer of  $625 million on  international markets with a  coupon or interest rate of $5.375% was canceled , one day before the operation was formalized foor Tocumen to receive the funds.

The initial purchaser of the issue, Citigroup Global Markets, informed Panama  Stock Exchange that  it had expunged the bid because it had not satisfied the conditions set out in the contract.

What changed the course of the operation was the publication on May 5 of the  Clinton list , naming Wisa, whose companies have a sttong duty free presence  at the airport.

The Clinton List is prepared by the  US Office of Foreign Assets Control (OFAC).

According to the US  Treasury Department, Abdul Waked, owner of Wisa Group, and his nephew Nidal Waked lead a network to launder money linked to drug trafficking.

When a company or person appears on the Clinton List, it prohibits US citizens and companies having  business relationships with the entities, causing a strong impact on their operations including the use of credit and debit cards.

Uncertainty about the business group and its close relations with Tocumen affecting the bond issue.  In addition, José Frade, executive Wisa Group executive, was on the airport board.

The issue will be relaunched with new conditions.

The issue was predicted to  amount to $570 million, with  5.625%  interest and maturing in 2036. Tocumen ends up getting less money and paying higher interest .

In the new prospectus, the administration explained to investors the relationship with the Wis group of companies and how to proceed after inclusion in the Clinton List. Tocumen clarified that the airport has not been identified and has not violated any law on money laundering or any OFAC regulations.

It said that the day of the publication of the Clinton List,, the resignation of Jose Frade was requested. It  took effect a day later.

The airport will seek to terminate its relationship with Wisa Group and its subsidiaries as soon as possible, in compliance with the rights and legal and contractual obligations said  the document.

Grupo Wisa is one of the main customers of Tocumen, S.A. In 2007 it won a concession to operate duty-free shops at the airport. La Riviera, Burberry, Brooks Brothers and Colombia are some of the stores in Tocumen Wisa Group.

The granting of Wisa Group for many of its stores, including the Riviera, will expire on December 14, 2017, no option for contract extension, said the airport administration.

a new tender for local prepares maintaining the current scheme of several dealers, so that no monopoly on the terminal.

Wisa Group contributes 7.7% of revenues of the state company, excluding key rights for the concessions received. However, Tocumen considers that operational problems Waked companies have “substantially lower in the short term impact on our revenue.”

Among other reasons because, in his view, consumers would use other airport shops and will be able to attract new dealers. A similar point was made by rating agencies Fitch Ratings and Standard & Poors, which ratified the investment grade bond issuance.

The latter said in a statement that “this could lead to a reduction in airport revenues, at least in the short term, as we believe Tocumen would be able to replace Wisa medium term.”