Aug 2010 Financial News

US$20 million bond placement

Aug 18, 2010

Trinidad Cement Limited has overshot by more than US$10 million agreed limits on its short term borrowings, but has secured the forgiveness of its creditors in anticipation of the cement maker getting back on track with its financing plan by next month.

The company's debt plan had called for the issue of a long-term bond valued at US$20 million (TT$127m), which TCL said was delayed to secure the approval of lenders.

The bond is to be marketed to institutional investors, Alan Nobie, company secretary and manager of Investor Relations and Corporate Communications for TCL group, told Wednesday Business.

"Having secured the approval the issue can be pursued on all fronts," Nobie said Tuesday.

At half-year, June 30, 2010, TCL said its net short term borrowings - debt less cash - stood at TT$51.6 million while total debt was US$260 million, the same position it was at December 2009.

However, "due to the delay in the issue of a new US$20 million bond, which is part of the funding plan for the year", said TCL in market disclosures, short term borrowings that previous loan agreements have restricted to US$45 million are now 22.7 per cent or US$10.2 million (TT$64.8m) over the limit.

"Waivers were received from lenders after the balance sheet date allowing the higher borrowings until the new bond is issued, now expected by September 30," said the cement maker's chairman Andy Bhajan and group chief executive officer Dr Rollin Bertrand in a joint statement to shareholders.

"In accordance with IAS 1,long-term debt should have been reclassified as short term as at June 30, 2010. In view of the waivers received this was not followed."

The terms of the bond are stillbeing worked on, but it will have a life of three to seven years for different tranches, marketed to institutional investors, and be placed largely inside Trinidad, Nobie said.

"We are not prepared to disclose the rates at this time," he said. "Other normal terms for such an issue will apply."

Arranger of the issue is Citibank Trinidad and Tobago Limited.

Asked about a back-up plan if the bond were to fail to excite investors, Nobie said only that TCL was also pursuing a debt/security/covenant rationalisation exercise that will address those issues."

Trinidad Cement's current level of indebtedness is directly linked to its backing of the US$177 million expansion and modernisation project by its 74 per cent-owned Jamaican subsidiary Caribbean Cement Company Limited.

Both companies are struggling with falling sales and huge debts: TCL's total liabilities now amount to TT$2.4 billion; while Carib Cement's hit J$5.7 billion - a figure contained by the conversion of J$1.33 billion of debt to parent TCL into preference shares.

Additional debt

TCL took on an additional US$105 million of debt to cover the Caribbean Cement project as well as upgrades and improvements at its own base at Claxton Bay in Trinidad.

The company's debt and other financing charges at half-year were 77 per cent of operating profit, which itself was under pressure because of dampened sales in the period.

Sales dropped from TT$930 million at half-year 2009 to TT$831 million in the current period, sending operating profit plunging 38 per cent from TT$162 million to TT$100.8 million.

Like its Jamaican subsidiary, TCL remains in a negative cash position, which in its case has close to quadrupled in six months from TT$21 million at yearend December 2009 to TT$77 million at June 2010.

A TT$8.95 million gain on disposal of two concrete manufacturing assets in St Maarten on March 31, did little to ease liquidity pressures, but was a fillip to bottom line profit of TT$47.89 million in the half-year period.

This, however, still underperformed HY2009, when the cement group reported net profit of TT$66 million.


Source:
Lavern Clarke, Business Editor
lavern.clarke@gleanerjm.com
Jamaica Gleaner
Wednesday August 18, 2010

http://jamaica-gleaner.com/gleaner/20100818/business/business2.html