Jul 2015 Financial News

TCL US$245m debt restructure earns ratings upgrade

Jul 08, 2015

THOUGH still non-investment grade (junk-rated), Trinidad Cement Ltd (TCL) has been upgraded by New York-based Standard & Poor’s Ratings Services (S&P) for its planned debt restructuring, according to an S&P report on July 6.

S&P said on June 30, it raised TCL’s corporate credit rating on to “CCC” from “D”. On October 3 last year, S&P had downgraded TCL from “B” which is five notches into junk to “D” which is the lowest rating on the credit rating agency’s scale, after the Caribbean’s largest cement maker defaulted on its debt payments.

“We also placed this rating on CreditWatch positive to reflect the likelihood that TCL’s liquidity could improve if the company successfully refinances its current bridge loan due February 2016. At the same time, we assigned a preliminary “B-” issue-level rating to the company’s proposed US$245 million senior secured term loan,” S&P said.

Giving its rationale, S&P said: “The rating action reflects TCL’s completion of its debt restructuring in May 2015, after the company missed its debt service payments in September 2014. Debt restructuring included an 11 per cent debt prepayment discount and a US$15 million cash prepayment, which reduced the company’s outstanding debt to US$245 million in May 2015 from about US$292 million at the end of 2014.”

Claxton Bay-based TCL refinanced this amount through a bridge loan it took out in May 2015, which is due February 2016.

The restructuring also included an equity injection of US$57 million in March 2015, US$44.8 million of which Mexican cement maker Cemex injected, increasing its stake in TCL to 39.5 per cent from 20 per cent through one of its subsidiaries, Sierra Trading.

TCL will use proceeds of the equity injection to finance capital expenditures, working capital, and strengthen its cash balance.

In addition, as part of the restructuring, TCL entered into a technical and managerial services agreement with Cemex, including support in manufacturing, procurement, planning, shipping, and trading activities.

As part of the agreement, TCL has appointed five Cemex executives to its management, including the new group CEO.

S&P said its rating is based, in part, on the assumption that TCL will reduce its US$245 million term loan by about US$36 million per year.

Source:
By Aleem Khan
Trinidad Express
Wednesday July 8, 2015

http://www.trinidadexpress.com/20150707/business/tcl-us245m-debt-restructure-earns-ratings-upgrade