TCL to suspend debt servicing as group restructures
Published:Wednesday | January 19, 2011 | 12:00 AM
Trinidad Cement Limited (TCL) said Monday that it will cease paying its debts until a new turnaround plan is crafted and agreed to by lenders and investors in the company.
Markets in Jamaica and Trinidad shrugged off the news.
The cement group says a creditor's committee has been convened and that an independent adviser is being hired as it moves to restructure its debt.
One of the first tasks is the development of a new business plan for the regional operation, whose top and bottom line earnings have fallen in the recession as construction markets softened and cement imports challenged its market share.
The creditor's committee comprises the cement group's largest domestic and international lenders, who together account for 75 per cent of TCL's total debts.
Trinidad Cement is facing cashflow problems, and its short-term debts of TT$808 million have surpassed its current assets of TT$954 million at September 2010.
The company also reported negative cash flows of TT$111 million.
The debt-restructuring became necessary after TCL breached performance criteria on its short-term borrowings and current ratio.
"The exercise is being undertaken to allow the group`s operations to be funded from the lower-income stream resulting from the severe effect of the current economic decline in all the markets," the company said in a stock-market filing Monday.
TCL trades on the Jamaican, Trinidad, Barbados and Eastern Caribbean exchanges.
The Jamaican market, where TCL trades infrequently and in small volumes, did not react to the news. In its home market, the stock traded flat at TT$2.80 on Monday. The stock is valued at J$53 in Jamaica and BDS$0.80 in Barbados.
The independent adviser to the committee will assess the company's ability to generate cash, the group structure and operations.
Once a business plan and debt-restructuring programme is negotiated and agreed to by the committee, the adviser and TCL, the cement group said it will seek approval from the broader pool of creditors and investors before implementation.
"It is expected that this exercise will continue until the debts are restructured, during which time the group will declare a moratorium on debt-service payments - both principal and interest - in order to preserve cash to sustain operations," said the notice issued by the TCL board, which said the issue was decided at its January 14 meeting.
Efforts supported
The approach "is fully supported by the major lenders since it will facilitate the TCL group's efforts to sustain itself and its operations over the current low level of the economic cycle," the company said.
TCL hopes to defer principal repayments on long-term loans due in 2011-2013 and is seeking to convert short-term borrowings into longer-term debt, TCL chairman Andy Bhajan and CEO Dr Rollin Bertrand disclosed on December 3 in a statement attached to the September 2010 financials.
"As compensation to lenders, the group has proposed a reasonable increase in the rates of interest and security for unsecured lines," TCL said, but did not specify the offer.
The group's long-term debts amount to TT$1.5 billion, much of it incurred for expansion plans that included a US$177-million modern-isation and upgrading of the Caribbean Cement Company plant at Rockfort, Kingston.
TCL reported a loss of TT$30 million in the third quarter ending September 2010, but was still TT$144 million in the black over the nine-month period.
It blamed its performance on "heavy losses" incurred by top subsidiary Caribbean Cement in Jamaica, and Barbados subsidiary Arawak Cement.
Caribbean Cement made losses before tax credits of J$1.4 billion in the third quarter and J$1.7 billion over nine months.