Cement producer TCL suspends debt payments, terminates CEO. Caribbean Cement impact weighs on October 31 plan
Trinidad Cement Limited (TCL) is weighing options on the repayment of TT$2 billion owed to lenders and has ousted long-time Chief Executive Officer Dr Rollin Bertrand, who was initially suspended for a month by the new board during which time Alejandro Ramirez, a director, was installed as acting boss.
TCL said in a market filing that Bertrand was terminated by a letter dated September 22 following a review of his performance.
Bertrand has served the company for at least two decades, having run subsidiary Arawak Cement Limited from 1994 to 1998. No permanent replacement for group CEO has yet been named.
The TCL board also said on Tuesday that it has put a hold on all payments under the debt deal struck with large creditors two years ago, when the cement maker found itself unable to cope with TT$1.7 billion of short-term debt on which it had defaulted.
Anthony Haynes, general manager of Jamaican subsidiary Caribbean Cement Company Limited, said on Wednesday that the decision taken at Claxton Bay this week "could mean another restructuring" of the Rockfort, Kingston-based, company's debt.
The full implications for the Rockfort operations won't be known until the group restructuring programme by TCL begins to take shape, he said.
The TCL board has given itself another month to chart a new direction for the group, whose businesses span several Caribbean markets, but the company said on Tuesday that the plan will "preserve ongoing operations".
The Jamaican operation is heavily indebted to its parent due to a capital infusion of J$3.8 billion in 2012 in addition to the conversation of another J$3.7 billion of debt to preference shares under the debt-restructuring programme agreed between TCL and its creditors in May 2012.
The bailout served as counterweight to the more than J$7 billion of accumulated losses on Caribbean Cement's balance sheet and strengthened its equity base.
Caribbean Cement operates Rockfort under lease payable to TCL, which owns the productive assets. Haynes said Caribbean Cement was up to date on its quarterly payments to TCL under the operational lease and that the standstill arrangement was unlikely to have an impact on Rockfort.
The 2012 rescheduling programme, which lengthened repayments on the debt to 2018, created a rift among shareholders of the company, which in turn fed into a campaign to replace six board directors that pitted TCL against a group of its minority owners, including its banker of five decades, Republic Bank Limited. The deal lengthened maturities up to six years on TT$1.95 billion of TCL debt held by more than 30 regional and international lenders and bondholders.
In 2013, TCL accused Republic Bank of influencing disaffected shareholders as the fight shifted to court - saying in a market filing on its court case that the bank's actions "appear to be a manoeuvre to assume control of the TCL board" - an argument that seemed to have had little traction in the Trinidad High Court.
Trinidad Cement similarly alleged this year that Cemex was attempting to take over the board through control of four directorships, having previously failed in its acquisition bid of 2002. Cemex is the single largest shareholder of TCL with a 20 per cent stake, while Republic Bank holds the second-largest block of shares totalling 11 per cent.
Led by Wilnet Holdings Chairman Wilfred Espinet, a small group of the minority shareholders with holdings totalling less than six per cent successfully blocked TCL from holding its annual general meeting in July 2013 and again in 2014, while they challenged, through the court, the rejection of their efforts to nominate alternative board members.
Though the substantial lawsuit was still pending, a larger group of minority owners with holdings of 54.7 per cent eventually forced a special mandatory meeting of shareholders in mid-August. Six contested board members, Chairman Andy Bhajan, CEO Dr Rollin Bertrand, Brian Young, Dr Leonard Nurse, Carlos Hee Houng, and Bevon Francis, all tendered their resignations hours ahead of the August 19 vote, clearing the way for the challengers - Espinet, Alison Lewis, Christopher Dehring, Michael Glenn Hamel-Smith, Francisco Aguilera, Carlos Alberto Palero and Nigel Edwards to be voted in without contest.
Alejandro Ramirez, Jean Michel Allard and Wayne Yip Choy retained their seats. Espinet then replaced Bhajan as chairman.
On September 18, the lawsuit brought by Wilnet Holdings and Others v Trinidad Cement, and another by Trinidad Cement against shareholder Kamal Ali, were discontinued by the Espinet-led board, with TCL to pay all legal costs in both cases.
Alongside that disclosure to the market this week, TCL said that following a financial assessment commissioned from Pricewater-houseCoopers and having met Monday, September 29, with its lenders, the company's board has opted to put a hold on the debt payments and proposed a 'standstill' arrangement.
A restructuring plan will be submitted by October 31, the company said.
TCL had projected to pay out TT$368 million on debt servicing this year. The company's long-term debts just top TT$2 billion, while its short-term liabilities now amount to TT$680 million.
In May 2014, Bertrand and the old TCL board tested the market but eventually pulled back from plans to issue a new corporate bond that was meant to raise US$325 million for debt refinancing and working capital needs. The bond issue was panned by rating agency Standard & Poor's, which said TCL was already highly leveraged and was without adequate liquidity but saw scope for improvement once the company reinvested capital in its operations.
Caribbean Cement is itself $3.9 billion in debt, two-thirds of which are long-term borrowings.