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Financial News

Aug 2011 Financial News

Carib Cement gets 18-month moratorium under debt deal

Aug 05, 2011

The Trinidad Cement Limited (TCL) debt restructure deal will result in an 18-month debt moratorium for its Jamaican subsidiary Caribbean Cement Company, according to general manager Anthony Haynes in discussion with shareholders Thursday.

The TCL debt 're-profiling' will take effect by the end of September and follows six months of negotiation by TCL, said Haynes at Caribbean Cement's annual general meeting held in Kingston.

"The debt re-profiling has given us an 18-month window to stabilise the company," said Haynes in his address.

Caribbean Cement has J$1 billion in negative working capital as at March 2011, which meant it had in insufficient coverage for short-term debt. Its long-term debt, due mainly to its parent, stands at J$2.3 billion. Its quarterly financial reports do not reveal its loan repayments; the disclosures are made at each yearend.

Additionally, the company's cash and equivalents are relatively low at J$71 million and it recorded a J$249 million loss in its first quarter 2011, hurt by competition from 'dumped' cement and the weak economy.

In February, FTI Consulting Canada was commissioned as an independent adviser to the TCL creditor committee under the group's debt-restructuring programme. TCL also retained BroadSpan Capital LLC as its financial adviser in the exercise.

"TCL group. who really owns this debt - you will be aware - has been in discussions with lenders in January this year and over the last few months," Haynes explained. "So, at the end of July, there was a clear agreement in principle and the outlook is that for the end of September the new debt structure will be legally put in place. Basically, for Carib Cement that will mean we will have a continued moratorium on debt and give us the opportunity to stabilise the company."

In June, TCL issued a statement revealing that an agreement was "drawing closer" and it expected to complete debt restructuring by late 2011.

"There have been several rounds of discussions between advisers on these proposals, with formal meetings held on May 12, June 2, 16 and 17, 2011, which have resulted in a number of counterproposals between lenders and the TCL Group. Generally, dialogue with lenders has been productive and the parties are drawing closer to agreement on the material terms of the re-profiling," said TCL's June statement released through the stock exchange.

"In summary, the current proposal considers an eight-year transaction with interest rates consistent with risk profile, along with the payment of a consent fee to lenders. Outstanding interest due to lenders will be capitalised at closing and quarterly thereafter through June 2012," it said.

Liquidity crunch

TCL was facing a liquidity crunch as cement sales fell and competition from imports eroded its market share. It has negative working capital at TT$1.38 billion at March 2011. The company was also short on cash and equivalents, reporting negative flows of TT$34.6 million. Its finances weakened after its heavily debt-financed investment in the modernisation of its plants, including a US$177m spend on Caribbean Cement's Rockfort operation in Kingston.

The Kingston plant is now at about 1.8 million-tonne annual capacity after the upgrade, an 80 per cent increase from one million tonnes, but sold less than 740,000 tonnes of cement last year.

Haynes said that its new plant was operating at half its capacity and wants new markets, including Venezuela, to fill that demand shortfall.

"I wish I could give you better news," said Haynes in conclusion. "The fact of the matter is that our outlook will remain challenging for the short to medium term."


Source:
Steven Jackson, Business Reporter
steven.jackson@gleanerjm.com
Jamaica Gleaner
Friday August 5, 2011

http://jamaica-gleaner.com/gleaner/20110805/business/business4.html