Feb 2015 Financial News

CCC assets pledged in defaulted TCL loan

Feb 27, 2015

CARIBBEAN Cement Company (CCC) made J$138 million net profit over 12 months ending December 2014 -- its highest in years -- but its future as a going concern remains uncertain, according to its auditors Ernst & Young.

That's because CCC assets are pledged as security for loans in "default" by its parent company Trinidad Cement Ltd (TCL), according to the auditors in a statement accompanying the financial accounts dated this month.

"Should the lenders execute their legal rights to enforce their security, there may be a significant risk that the TCL Group and the CCC group would be unable to continue as a going concern. The CCC group's assets are pledged as security for the TCL Group's loans," stated the chartered accountants.

The auditors however, added that CCC directors have a reasonable expectation that the TCL Group will be successful in rescheduling the debt service obligations with its lenders and implement the overall restructuring plan.

CCC's net profit up 21 per cent year-on-year was made at a time when TCL recorded its biggest net loss at TT$211 million. Additionally the TCL group recorded negative working capital as at 31 December 2014.

"The TCL Group has commenced negotiations with the lenders who have not sought to enforce their security and legal rights. The rights of the lenders remain unchanged whilst formal agreement on new terms is being pursued. Pending completion of this approval process and legal execution of a new agreement, the lenders could enforce their security and legal rights to demand immediate repayment of all outstanding obligations which the TCL Group would be unable to meet," indicated the auditors.

Last September 2014 the TCL Group suspended principal debt repayments due under its restructured loan agreement "which had the effect of creating a condition of default at year end". The auditors indicated that it rendered all outstanding debt covered by this agreement to become due immediately, resulting in the reclassification of all long-term debt, amounting to TT$1.8 billion, to current liabilities. "Resulting from this reclassification, the net working capital deficit of the TCL Group was TT$1.5 billion as at 31 December 2014."

TCL expects to finalise talks with lenders and avert any disruptions at the group, according to TCL board in a statement accompanying its annual report.

"The company has commenced negotiations with the lenders and at the date of approval of the financial statements by the board of directors of the company, the TCL Group and the majority of the lenders had reached agreement in principle on features of the loan restructuring and its key terms. In addition the board has embarked upon a comprehensive financial and operational review of the TCL Group, which is in progress, and an overall restructuring plan for the TCL Group which seeks to secure the long-term viability of the company is being implemented," stated management in its annual report released this month.

Its plan includes the completion of the loan restructuring with the lenders, settlement of all back-pay payments to employees in Trinidad and Tobago, and the injection of equity capital from the shareholders.

This overall restructuring is expected to be completed by the second quarter of 2015.

An overwhelming majority of shareholders voted at a special general meeting on February 9th 2015 to remove the 20 per cent restriction on shareholding by any one shareholder, according to the TCL report.

Source:
BY STEVEN JACKSON
Business reporter
jacksons@jamaicaobserver.com
Jamaica Observer
Friday February 27, 2015  

http://www.jamaicaobserver.com/business/CCC-assets-pledged-in-defaulted-TCL-loan_18478061