Former CEO stands by position on TCL
The former chief executive officer of the regional cement manufacturer, Trinidad Cement Limited (TCL), said the United States (US) high-yield market remains the "best opportunity' for the financially troubled company to deal with its US$300 million debt.
Dr Rollin Bertrand, who was dismissed by TCL board of directors two weeks ago, in a statement published in the Trinidad Guardian newspaper, said that he disagreed with the new TCL chairman Wilfred Espinet's position on the issue.
"He will soon learn the US high-yield market is still the best opportunity for the company to reduce interest rates (below 8.0 per cent) and have a more covenant-friendly arrangement with lenders.
"Local and regional capital markets are simply too thin to cope with restructuring TCL's US$300 million in debt at reasonable rates. He expressed surprise after the last debt restructuring in 2012, TCL came away with "high principal and higher interest rates" but that is exactly what the last board was complaining about, much to the chagrin of the existing lenders," Bertrand wrote.
Espinet disagreed with plans by Bertrand to float new, mostly United States dollar bonds to replace TCL's US$300 million in debt.
"We had real difficulty understanding how, in 2011, TCL could not pay its debt, and what evolved out of the debt restructuring, as they called it, was the company came out with a higher principal and a higher rate of interest and no other attempt to do anything else to the company."
He said that no attempt was made in the original debt restructuring to change the way TCL did business. "They were doing the same thing but expected different results. It certainly did not make sense to us. My point to the lenders was that in doing this (debt restructuring), you made no demands for the change of management, which we thought was what got the company here in the first place," said Espinet.
No restructuring demands
"They made no demands for a restructuring of the company's operations, that TCL should jettison some of those things that were dragging them down and focus on those things that were sensible. They made no attempt to ensure that there was new equity introduced into the company - all of these elements are requirements in a restructuring exercise," he said, adding "all the creditors did was add more debt to a company that could not pay its debts."
Bertrand was among six directors, including the former chairman Andy Bhajan, who resigned from the company, minutes before the special meeting was called in August to elect new board members. Bertrand, however, had held on to his post as chief executive officer until his dismissal two weeks ago.
Espinet told the Business Guardian last week that the regional cement producer s at a "critical stage of its existence," and its survival depends on "its stakeholders and their willingness to protect the company" and participate in the "drastic restructuring that is required."
Elements under consideration
Espinet said some of the restructuring elements under consideration by the new board for the company with operations in Barbados and Jamaica are the disposal of non-core assets, a reduction in the group's cost of production, lowering its average cost of borrowing and raising capital from its shareholders.
But Bertrand said Espinet talks about "core" and "none core" assets adding the TCL group is a typical vertically integrated cement company with investments in "non-core" assets that are mission critical.
"He talks about closing down Arawak, but that is a core asset," Bertrand said, noting that "cement assets are not easily sold and, once shut down, are very difficult to re-activate.
"A company could lose a significant market by closing capacity during a downturn and handing the market over to importers, who would be very difficult to dislodge once the economic climate improves. He then refers to the packaging companies and Readymix as non-core, but they are also strategic and profitable."
The former TCL executive also disagreed with the new chairman regarding the finances of the company, noting there had been "a dramatic improvement" in performance over the past three years (2011, 2012 and 2013).
"The group's EBITDA improved from US$15.4m in 2011 to US$26.3m in 2012 to US$62.6m in 2013 and was on track for US$70m in 2014. These results were not achieved by "doing the same thing," Bertrand added.
Espinet said that PricewaterhouseCoopers (PwC), which was engaged by TCL to do a financial assessment of the company, presented its initial findings to TCL's lenders, which include some of the country's major financial institutions such as Republic Bank, First Citizens, the Unit Trust Corporation, Sagicor, ANSA Merchant Bank and Citibank.
He said PwC's initial findings were that TCL had about US$20 million in cash as of the end of the third quarter last Tuesday and commitments to make a payment of US$90 million to its lenders, which was due last week.
The company has also been mandated by an Industrial Court ruling to make a payment of about TT$100 million in back pay to its workers pertaining to the 2009 to 2011 period.
He said TCL's immediate financial obligations could increase by millions of dollars given the outstanding arrears still being discussed.