Financial Turbulence Unfolds as Tonga Development Bank’s CEO Faces Controversy Over Cost Low Deal
Cost Low Company Limited has filed an application Notice for Injunction on a Mortgage Notice issued by Tonga Development Bank.
In March 2023, a pivotal meeting occurred between Mrs. Emeline Tuita, CEO of the Tonga Development Bank (TDB), and Mrs. Charlotte Cocker, the head of Royco Group, owners of Cost Low. They gathered to discuss refinancing Cost Low for an upcoming project. Cost Low had previously secured a government construction contract in Tufumahina, requiring financial support from TDB.
According to documents obtained by the Tonga Independent, TDB’s CEO proposed merging Royco Group’s debts into a new entity for the project, an idea approved by Royco Group’s board. This gave birth to the Royco Development Special Purpose Vehicle (SPV) to facilitate the new initiative.
The SPV involved migrating all Royco Group subsidiaries, with TDB owning 80% and Cost Low owning 20% to clear Cost Low’s debts. A board mirroring this share structure would govern the SPV. This decision was officially confirmed in a letter from TDB’s CEO to Royco Group’s directors on March 20.
On March 26, TDB invested $2,184,000 into Cost Low, solidifying their commitment. However, on March 27, an unexpected delay occurred when Mrs. Cocker’s accountant came to execute share transfer documents for the new SPV. No clear timeline was provided, raising concerns.
As April began, there was a noticeable lack of progress despite attempts to communicate with TDB. Mrs. Cocker discovered a serious breach of confidentiality related to Cost Low’s banking affairs, suggesting a third party’s involvement and TDB’s reluctance to uphold the initial agreement.
It has come to light that the third party has been making enquiries regarding the contract held by Cost Low, with information that only TDB and Cost Low were privy to.
In response, Cost Low’s legal representative sent letters to the Reserve Bank and TDB’s Chairman of the Board of Directors on April 12, alerting them to the confidentiality breach. Unfortunately, neither institution intervened.
The situation took a surprising turn on August 8 when TDB issued a Mortgage Notice, alleging defaults on securities and intending to take possession of Cost Low’s property with the involvement of the police.
Stay tuned for part two as we delve into the identity of the third party and explore the CEO’s change of stance.
