Home' Trinidad and Tobago Guardian : April 2nd 2015 Contents BG6 COVER STORY
BUSINESS GUARDIAN www.guardian.co.tt APRIL 2015 • WEEK ONE
Following its successful rights issue, which
raised more than US$56 million and addressed
issues with its balance sheet, Trinidad Cement
(TCL) is getting ready for the next stage of its
restructuring: the refinancing of its existing
US$280 million debt with new loans.
Disclosing this information in recent inter-
views, TCL chairman Wilfred Espinet said at
its close the rights issues will be totally sub-
"I don t think there has been a rights issue
that has been completely subscribed in the
history of T&T," noting that unlike most other
rights issues in which new shares are issued
at a discount, the TCL rights issue involved
shares that were issued at a premium.
At the end of the rights issue Mexican
cement giant has a 39.5 per cent stake in TCL,
which means that there will be no need for
a private placement.(See sidebar)
He said one of the specific benefits of the
success of the rights issue is that cement pro-
ducer, which is headquartered in Claxton Bay,
will receive an immediate reduction in the rate
of interest it pays on its existing debt.
Espinet explained that when at the end of
September 2014, TCL stopped its debt pay-
ments, which meant that its interest charges
for the fourth quarter of last year increased
from 10 per cent to 12 per cent, in accordance
with debt restructuring exercise agreed to by
thement from 2012.
He said the total interest charge at the end
of Sept 2014 was US$7 million and the increase
in the interest rate pushed the interest charge
for the fourth quarter was US$8.5 million.
Said Espinet: "One of the specific benefits
of the rights issue is that it will result in an
immediate reduction in TCL s interest charge.
When we went into the standstill, our interest
charge went from 10 per cent to 12 per cent.
"As a result of us getting in this new capital
from the rights issue, our creditors are going
to reverse the 2 per cent penalty and have
agreed to lower the average interest from 10
per cent to 8 per cent from January 1, 2015."
. This means that for the first quarter of 2015,
from January 1 to March 31, TCL will be paying
an interest charge of about US$5.5 million,
which means that "as a result of the new
capital brought in by the rights issue, TCL s
benefit in interest charges is about US$6 million
a year," said Espinet.
And he said that assuming the rights issue
brings in about US$56 million, this means the
return, in terms of the savings on the interest
charge, that TCL is getting from the rights
issue is about 11 per cent.
He said that what is more important than
the rights issue or the resulting savings in debt
payments is that those elements of TCL s plan
"set the stage for the real coup de gras," which
is the attempt by the cement company to raise
debt to pay off all of the existing debt held
by its creditors, amounting to US$280 mil-
According to a TCL notice in the Wednesday
Guardian, the debt restructuring agreement
with its existing creditors gives TCL "the ability
to prepay originally secured and unsecured
debt on a discounted basis within 90 days of
the effectiveness of the restructuring agree-
The challenge of the board is to find creditors
who would be willing to invest in TCL s debt.
Espinet said: "If the current debt holders
are paid off in full, within 45 days of the debt
restructuring agreement coming into force on
March 30, TCL will save about US$30 million
Asked whether the refinancing of TCL s
existing debt meant embarking on an expen-
sive, multi-city tour of North America, as was
done last year by the dismissed former CEO
of TCL, Rollin Bertrand, the current TCL chair-
man said that the company s largest single
shareholder, Mexaican cement giant Cemex,
had tapped its international financial connec-
tions to bring investment bankers to T&T.
He said three or four banks have made debt
refinancing proposals to TCL, which are being
evaluated by a three-member board committee
chaired by Unit Trust Corporation executive
Nigel Edwards and including directors Alison
Lewis and Alejandro Ramirez Cantu, the com-
pany s acting CEO.
He said TCL had been trying to tap the debt
market for the debt refinancing but that "the
initial response is that there is little appetite
He said TCL is looking for different stages
of debt refinancing and will perhaps go for a
short-term facility that will allow TCL to ben-
efit from the discount available in the limited
time, until May 15, that it has to organise the
The board will consider a short-term facility
with an 18-month horizon that is likely to be
converted into a longer-term facility.
The financial restructuring of TCL is not
the end of the changes that the group, which
has operational subsidiaries in Jamaica and
Barbados, will undergo this year.
The cement company s chairman said the
financial restructuring and refinancing are just
the first phase of a two-phased operation:
The restructuring and strengthening of the
holding company will be followed by restruc-
turing of the operational subsidiaries.
"This second phase of operational reorgan-
isation will focus on making cement as effi-
ciently and cost effectively as possible. Our
objective there would be to ensure that the
cement produced by TCL is internationally
Espinet also noted that under the previous
administration of the group, TCL announced
a moratorium on its debt payments in January
2010 and never completed its debt restruc-
turing exercise until May 2012. He said the
result of the negotiations was that TCL a
higher interest rate, from 8 to 10 per cent, on
an increased principal base.
As compared to a debt restructuring exercise
that took more than two years to complete
and which put the company in a worse financial
position, Espinet noted that the current board
completed its debt restructuring exercise within
six months and it has placed the company in
a stronger financial position.
The TCL chairman also noted that in order
to meet its debt payments, the previous admin-
istration at TCL found itself having to forego
capital expenditure, which led to higher main-
tenance costs and lower productivity.
Espinet said the rights issue and the breath-
ing space resulting from the reduction in the
quarterly interest charges will allow the group
to embark on new and essential capital expen-
diture, which will result in lower maintenance
costs and higher productivity.
TCL now looking to
refinance US$280 mn
About rights issue
For a non-renounceable pro rata
Some 124,882,568 new shares will
be issued at a price of $2.90 per new
share on the basis of one new share
for every two existing shares held.
The amount that the company
expects to raise under this rights
issue is $362,159,447.20 (before
In a letter to shareholders in the
TCL information memorandum for the
The money raised under this Rights
Issue will be used to:
• pay restructuring and transaction
• replenish working capital;
• service debt;
• invest in capital expenditure.
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