Feb 2015 Financial News

Shareholders vote for change at TCL

Feb 11, 2015

Financial restructuring of Trinidad Cement Limited’s (TCL) $1.9 billion debt is now in the works.

This is after 91.4 per cent of 200 shareholders present at a meeting at Hilton Trinidad on Monday night voted in favour of removing a 20 per cent ownership limit.

The removal of the limit was one of the pre-conditions for financial restructuring set by the company’s lenders.

The other pre-condition is that shareholders need to inject US$50 million into the company in the form of equity.

“The board on February 6 agreed to issue 124.88 million shares at a price of $2.90 per share. Essentially, for every two shares that you now hold you will have the right to buy one share in the rights issue. If all the shares are subscribed then that will raise a total of $362 million or US$56 million roughly,” TCL director Nigel Edwards explained.

Edwards noted changes by the lenders have to be effected by April 30, with a negotiated 30-day extension if needed.

“So the latest possible date for this being in place is May 31,” he said.

Edwards noted that the effectiveness of the lenders’ agreement hinges on the US$50 million going into the company and as such the TCL board felt that it was important to get a “backstop” shareholder, which in effect is a major shareholder who would buy any of the unsubscribed shares.

Edwards said a backstop agreement was made with Sierra Trading, a subsidiary of Mexico-based cement giant CEMEX, which owns a 20 per cent holding in TCL.

“Sierra Trading has committed that they will participate at a minimum the amount that is permitted by their shareholding, which is 20 per cent. They have agreed that to the extent that shareholders do not take up their allotment in the issue they will take up to a maximum of the US equivalent of $45 million. That will limit Sierra Trading’s participation to no more than 40 per cent in the company.”

Edwards said in the event Sierra Trading is unable to acquire a minimum of 35 per cent of the shares in the rights issue, the board will arrange for a private placement, subject to the approval of the shareholders, to get Sierra Trading to the 35 per cent threshold.

About an hour before voting, the shareholders were told by Pricewaterhouse Coopers’ (PwC) Brian Hackett that, given the immediate commitments of the company, it would not have survived beyond December 2014 if financing had not emerged.

TCL’s total commitment is $2.1 billion, while the company’s annual turnover is between $1.8 and $1.9 billion, Hackett said.

He noted that during PwC’s five-week review of the company, it found that profitability was returning but not at a rate that “would have staved off a possibility of insolvency”.

“As at the end of our review, we came to a conclusion that there was an unfunded cash deficit of between $234 million to $266 million. By unfunded, I mean there was no further credit that could have been accessed at that point in time to meet commitments of the group. Available cash was $171 million, not an unsubstantial amount. According to management’s projection, a further $67 million of cash would have been generated over the period October to December, leaving a total of $238 million of cash to service the company’s obligations,” he explained.

“If we ran the projection forward one more year, we saw that gap would have gone to $371 million by the end of December 2015. Now, quite frankly, there is no way the company in our view would have gotten to that point because there was no funding to go beyond the first deficit,” Hackett added.

Past and present management clash

Earlier in the four-hour meeting, there was a heated exchange between TCL chairman Wilfred Espinet and former chief executive officer Dr Rollin Bertrand.

Bertrand, who was fired last September by the new TCL board, challenged the two-minute time limit given to shareholders to voice their opinion on removing the 20 per cent cap.

“You should have come to shareholders on a more timely basis. What you’re doing is throwing it at us and letting us go and vote. And you only have two minutes to speak. I think that is unacceptable. I think it’s important that we raise a lot of critical issues because you are now talking about the future of the organisation that has been around for 60 years, and you just reach,” Bertrand said.

But Espinet was quick to interject.

“Well, Mr Bertrand, I don’t want to create a debate here, so I think that we have to be reasonable in understanding that you have had 26 years in which time you could have made any comment you wanted.”

 

Source:
By Leah Sorias
Trinidad Express
Wendesday February 11, 2015

http://www.trinidadexpress.com/news/Shareholders-vote-for-change-at-TCL-291464561.html