An interesting financial story today. Siboney Corporation, an educational software company, filed with the SEC in December that it is selling its Cuban oil exploration rights to Clarinbridge LLC. I had come across the company as a children’s librarian. At the time, I thought there had to be a Cuban connection, but promptly forgot about it. Today’s news had me questioning what the connection was between software and Cuban oil rights.
Here’s the scoop. In 1955, Siboney Caribbean Petroleum was formed to explore for oil in Cuba. After the revolution, the Cuban assets were seized. The company then underwent a number of changes, including buying a software company. Eventually, the new company divested itself of the other businesses, remaining in learning software.
After nearly fifty years, Siboney sold the rights for over a million in order to pay company debt. Of course, at the moment, this all seems a bit moot, as the present Cuban government owns just about everything at the moment.
For some general background, here.
5 comments:
These claims belong to American Citizens and US Corporations that were encouraged by the US government to invest in Cuba. There are over 5,911 US Certified Cuban Claims and with interest, the claims are worth over 8 billion, but if they are being bought up at a fraction of their value, then Castro won’t have to pay up. His foreign friends are doing the dirty work for him. These claims used to be a bargining chip for the US government to demand that Cuba end communism and compensate the US claimants, or else we will continue the US Embargo against Cuba. That chip will dwindle if the claims are gone and bought up by Castro’s Investor friends. The claimants have been waiting over 40 years for their ship to finally come in, as promised by the US government, and they should be compensated, but fairly and not for a fraction of it’s value.
The deal they made was not so good. First of all, did you know that the Cuban government passed a law a several years ago that allows foreign investors ownership? But once the embargo ends, their investment can't be protected if there is a US Certified Cuban Claim against it.
The Syboney claim would be worth millions now because the claims have been increasing in value at 6% per year (see Foreign Claims Commission website) compounded interest from the date of seizure, and that has been over 40 years ago.
Did you know that there was a large oil find in the waters north of Cuba, and rumor has it that the oil is high quality? Canada, Spain, India and China are already drilling or getting ready to drill while the US oil companies angrily sit on the sidelines. The US oil companies are trying to get legislation passed that would exempt them from the Embargo, so they can get their hands on it as well.
If you look at the Foreign Claim Commission latest report, they mention that lawyers are looking at claims, so that they can advise their foreign investors on what investments they should stay away from. I think they are looking at claims, to protect the investments that their investors already have.
It's not just oil though, it's bigger then that! There are also several Hedge funds that are buying up claims, see Herzfeld Fund and Cuba Fund on the Securities and Exchange website.
Everyone wants a piece of Cuba! The airlines cruise ships, hotels, shipping, etc. They all want to do business and there are several lawyers and consultants that make a living by advising companies on how to do business in Cuba now, and what you need to do to get ready once the embargo is lifted. There is even a US Cuba Trade Association made up of US companies that are preparing to start doing business in Cuba.
The Canadians already have a huge investment in Cuba. Sherritt International has been doing business in Cuba for a long time. It all started when they found a big nickel deposit. Also, Leisure Canada is investing and building hotels, but they claim to have no American links to their investments.
I am sure Castro encourages his foreign investor buddies to buy up the claims, that way he won't have to deal with those pesky US Certified Cuban Claimants later. The US citizens are 40 years older now and US corporations that have claims have either merged or changed what they do, such as Syboney did. I am sure they were happy to get something and have no clue as to what is going on in Cuba with the oil find, since presently their business is education software.
The Embargo will end. The United Nations has all but 4 votes to end it! Several US states are now allowed to export agriculture, medicine, and food to Cuba for humanitarian reason. The US is now one of the top 10 countries currently doing business (export) with Cuba. Once the embargo ends, those state can do even more business with Cuba and they are all working their congressmen and senators to end the embargo, not to mention the efforts of the US oil companies lobbyists.
These claims belong to American Citizens and US Corporations that were encouraged by the US government to invest in Cuba. There are over 5,911 US Certified Cuban Claims and with interest, the claims are worth over 8 billion, but if they are being bought up at a fraction of their value, then Castro won’t have to pay up. His foreign friends are doing the dirty work for him. These claims used to be a bargaining chip for the US government to demand that Cuba end communism and compensate the US claimants, or else we will continue the US Embargo against Cuba. That chip will dwindle if the claims are gone and bought up by Castro’s Investor friends. The claimants have been waiting over 40 years for their ship to finally come in, as promised by the US government, and they should be compensated, but fairly and not for a fraction of it’s value.
Thanks for the stats. I've been hearing rumors for the past few years that Spanish concerns were approaching some oldsters in Miami and buying their interest in places like centrales at ten cents on a dollar.
I hope anyone considering buying any of these certified Cuban claims has researched the law. I hope they are aware that when there is a settlement of these claims between the Cuban and American governments these buyers of these claims will only be entitled to what they paid for the claim. See the statute below:
TITLE 22--FOREIGN RELATIONS AND INTERCOURSE
CHAPTER 21--SETTLEMENT OF INTERNATIONAL CLAIMS
SUBCHAPTER V--CLAIMS AGAINST CUBA AND CHINA
Sec. 1643f. Action of Commission with respect to claims
(a) Certification of amounts
. . . .
(b) Limitation on amount of claims of assignees
The amount determined to be due on any claim of an assignee who
acquires the same by purchase shall not exceed (or, in the case of any
such acquisition subsequent to the date of the determination, shall not
be deemed to have exceeded) the amount of the actual consideration paid
by such assignee, or in case of successive assignments of a claim by any
assignee.
(Mar. 10, 1950, ch. 54, title V, Sec. 507, as added Pub. L. 88-666, Oct.
16, 1964, 78 Stat. 1112.)
The people that are buying the claims are not doing it to sell it again for profit. They are buying the claims in order to protect them from the claimant later. For example, they might buy a claim that has a track of land. They can buy the claim and build a hotel on the land, and after the embargo ends, they have the security that their investment is clear and not subject to someone trying to reclaim the land. That's why, it has more to do with protection, not profit. Raul Castro is letting foreign investors lease land for 75 years now, so that's their incentive.
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