SCJ Holdings falters on sugar payments
Published:Sunday | March 27, 2011 | 12:00 AM
Mark Titus, Business Reporter
SCJ Holdings Limited's failure to stick to a repayment schedule agreed with Jamaica Cane Product Sales (JCPS) has forced the latter entity to secure a J$500-million loan facility from National Commercial Bank to ensure that sufficient funding is available to complete the 2010-11 crop.
The funds will be drawn down on an 'as-needed' basis, with SCJ Holdings responsible for the repayment, separate and well-placed industry sources have confirmed.
JCPS, the marketing arm of the sugar industry, will need the funds, our sources said, to meet payments to sugar manufacturers on the first two export shipments already sent to Tate & Lyle.
Another source said the interest rate on the loans would be determined at each drawdown.
The British sugar refiner retains 60 per cent of the earnings from the first four shipments under its forward contract with SCJ Holdings as repayment of the pre-financed total of US$26 million paid upfront to secure the sugar supplies.
The arrangement has effectively cut into revenue that would normally have financed the payment to sugar producers.
"SCJ Holdings had an arrangement to reimburse the industry J$50 to J$100 million per week, up to a certain time, but they have not been able to honour that schedule, so they made a request for a rescheduling of the debt," a source close to the situation told Sunday Business on Friday.
"The difference with the previous arrangement and the new schedule is that in the original schedule, they would have cleared all or most of the money outstanding to JCPS by the second payment," the source explained.
Period for payment
He defined the period for payment as four weeks after the completion of the crop at mid-summer.
The new arrangement will see the bulk of the repayment happening closer to November, Sunday Business understands.
"Therefore, the anxiety in the industry is that if something should happen and they do not make the amount of sugar which they project to make - which now stands at 92,000 tonnes - how is the industry going to finance the cash flow between now and the final payment?" another source said.
Minister of Agriculture and Fisheries Christopher Tufton referred Sunday Business queries to Aubyn Hill, the chief executive officer of SCJ Holdings, but Hill said he was not prepared to discuss the matter.
Asked if he was denying that his agency had received the loan support from the Karl James-led JCPS, Hill replied: "I am not saying anything, sir. I think you should talk to Jamaica Cane Products."
Several calls to James's office found him either at lunch, on a call, or in meetings. Neither did he respond to a request through his personal assistant to return the calls.
The loan sought by JCPS, a private entity contracted by the Government to pool and sell sugar produced by the industry, would have needed sign-off by its board.
JCPS is chaired by former banker Orville Walker, while its directors include Hill; Robert Clarke; and Robert Henriques, representing the Sugar Manu-facturers' Corporation of Jamaica (SMCJ); Allan Rickards, chairman of the All Island Jamaica Cane Farmers' Association (AIJCFA); Harold Brown, chairman of the St Thomas Parish Council; and trade union representatives.
Efforts to speak to a member of the board proved futile.
Industry players believe JCPS had no option but to step in in the absence of an explanation as to why the US$26 million upfront payment was not enough to finance the monies owed to sugar manufacturers.
No explanation
"There is still no clear expla-nation, but what I think the board had to consider is that if the request is refused, the factories would grind to a halt," said one source.
"It would be to the detriment of some innocent people who have worked hard for their money, and, therefore, they might have been forced to support something they didn't want to do.
"What is known for sure is that wherever the US$26 million went, they did not reserve any of it as recurring or capital expenditure to effect the crop," a manufacturer offered.
Tate & Lyle has already received two shipments, the source said, with a third scheduled for delivery this month. The British refiner is to be supplied with 100,000 tonnes of sugar.