Home' Trinidad and Tobago Guardian : October 2nd 2014 Contents OCTOBER 2014 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
COVER STORY | BG5
the notice said the TCL board took a decision to place a hold
on all payments due under the existing Restructured Loan
Agreements and proposed a "standstill" in interest payments.
Asked on Wednesday morning whether the standstill request
applies to the back pay owed to workers, Espinet said: "All
stakeholders will be treated equitably in an effort to arrive at
a comprehensive restructuring that secures everyone's long-
The new TCL board gave its lenders a commitment that
it would present a comprehensive restructuring plan by October
31 and hopes to get agreement from its stakeholders---including
the company's lenders, its workers and their representative
trade union, the Oilfields Workers' Trade Union (OWTU), and
its shareholders---by the end of 2014.
Espinet said the board has identified that TCL has a number
of operational assets "that cannot be sustained. They are not
viable. In the future, they would not be viable."
Among those operational assets that are not viable is the
Arawak Cement Company in Barbados.
"I think that Arawak is a very evident example as it is the
biggest rock that is sticking out of the water," said the TCL
He said in Barbados, TCL is unable to meet its statutory
commitments to its employees and has negotiated a term of
payment with the Barbados government, but since Arawak is
losing money the payment will have to come from other
sources within the group.
He said there are a number of operational assets "that are
just below the level of the water, so you think it's looking like
clear sailing, but you are so shallow that you are going to hit
it."He said the questions these barely visible "rocks" must
answer are do they form part of TCL's core business and are
they viable in terms of the structure that TCL is looking to
in the future.
Espinet identified TCL's core business as cement production
and said the company "is unfortunately involved in businesses
that are not necessarily cement."
Asked to provide examples, Espinet referred to TCL's bag-
making subsidiary, "which is making bags at twice the price
that they can buy it at because they have created a fictitious
arrangement in terms of the way they price their bags." This
means, Espinet said, that TCL is making a "profit" on something
they are overpaying for.
Another example of a part of the TCL group that may not
be core is its concrete-making subsidiary. Espinet said: "We
need to take a strong look as to whether we are cost effective
in concrete making because our competitors are end users of
cement, so we are competing with our customers. Also, our
cost structure is inconsistent with the marketplace we are
operating in." TCL's competitors in concrete production include
Junior Sammy, Alescon and Coosal's.
Lowering cost of production
The TCL chairman said the company had inherited labour
costs and practices from the oilfields---from its location in
between the Petrotrin oil refinery in Pointe-a-Pierre and Point
Lisas and its union representation by the OWTU.
Espinet said: "If we are going to have to live with that, then
we are going to have to develop some efficiencies. We cannot
use those numbers and have a labour force that is not consistent
with the standards of the industry. So we have to find a way
to rationalise that."
Asked whether the cement-producing part of TCL in Trinidad
was overstaffed, he said: "If one benchmarks TCL to world
standards, TCL carries a higher labour cost of production.
The benchmark is not necessarily only about labour rates---
and we do not intend to cut people's salaries---it includes the
number of workers per tonne of cement."
Addressing the high cost of production requires TCL to
make some capital investments in technology to ensure that
the company has the level of productivity it needs to be able
to better benchmark its production.
He said the history of confrontation between workers and
management has brought TCL to where it is now.
"Maybe we are naive, but we are hoping that we will be
able to get to a situation where labour understands that a
company cannot be feed off of unless it is robust. You can't
eat a company like it is meat. You can nurse off of it like you
are getting milk. But if you eat the meat off of it, you are not
going to have anything."
Part of lowering its cost of production would mean a lower
monthly outlay on its debt repayments. Espinet said its average
interest-rate cost on its existing debt is now about ten per
cent. "The board is trying to reorganise its balance sheet at
the end of this entire exercise so that our US-dollar interest
rate---as most of our borrowings are in US dollars---would be
in the range of six to 6.5 per cent."
He said that means the TCL balance sheet would need to
be restructured so that lenders feel that it qualifies for that
rate of interest---which TCL is hoping to achieve by the end
of this year.
New equity capital
Espinet said he envisages that the company's long-term
capital and working capital requirements will come not from
new borrowing to take out the current bondholders, but from
the company's shareholders.
He explained that there are some covenants in the loan
agreements that stipulate the debt ratios that the company
must not breach.
Espinet said: "We need sufficient working capital, a long-
term capital injection in the plant and cost of production that
is brought in line, which we need to work out with our union...
as we need to work out with our bankers the financing we
need to bring this about.
"If we can get those two elements done, then we can go
to our shareholders and say to them: In order to get this done,
we need to get an injection of capital.' This would mean that
the three main stakeholders would have participated in this
Any future money that TCL needs would have to come
from shareholders, said Espinet, agreeing that a rights issue
would be the "most appropriate way to go."
Stressing that the possibility of a rights issue was not a
decision of the board, he said: "A rights issue would be the
likely scenario, if you were to ask me my personal vision of
what could happen."
Questioned on whether he thought that TCL shareholders
would agree with a rights issue, given that shareholders' returns
have taken a beating over the last eight years, Espinet said:
"To anyone of the existing shareholders that have the where-
withal, it could give rise to an opportunity for them to secure
their existing shares in terms of its value and they will be
putting money into something that will translate---if everybody
did what they are supposed to do---to a great gain for them,
in terms of...re-establishing shareholder value."
Is sale to Cemex an option?
The TCL chairman says Mexican cement giant Cemex,
which owns a 20 per cent stake in TCL and has three directors
on the ten-member board, has committed to helping the local
cement producer with the technological and market require-
ments of the restructuring.
Espinet said he would like to see a cross-fertilisation of
employees between Cemex and TCL, whereby local workers
visit Cemex plants around the world so that they are exposed
to different practices and Cemex workers visit Claxton Bay
to pass on best practices.
Asked whether a sale of TCL to Cemex was on the cards,
Espinet spoke about the importance of cement to the econ-
"We have a cement factory here. We don't want to control
who owns it. But certainly if Trinidadians want to participate
in the ownership of the company, they should be allowed to."
He said the board has no intention of supporting the sale
of TCL to Cemex or of being a catalyst for such a sale, he
"But if one of the large institutions wants to sell and Cemex
buys it, that's up to them. It's not for the board to interfere
with that process...The board will not initiate a bid by anybody,
as the board feels that it is going to conduct an exercise that
can solve this problem."
Continued from Page 4
New restructuring plan ready by October 31
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