Home' Trinidad and Tobago Guardian : July 3rd 2014 Contents JULY 2014 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | PAGE 3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
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In the last Sunday BG, the business magazine decided
to lead with a story headlined "Turmoil at TCL," which
reported three issues affecting the Claxton Bay-based
• Last week, TCL directors officially received notice of a
requisition by a group of shareholders---who now have the
support of over 54 per cent of the total shareholding of the
company---for the removal of six directors and their replacement
with seven representatives of the majority shareholders;
• That on Friday TCL lost a major case in the Industrial
Court involving the 2012 strike called by the Oilfields Workers
Trade Union and the company was directed by the Court to
increase the salaries of four classes of TCL workers by nine
per cent. TCL was also ordered by the Industrial Court to
make arrangements to pay arrears (also known as backpay) to
the workers by August 8;
• TCL executed an increase in the price of a 42.5 kg bag
of Premium Plus Cement by nine per cent on July 1. That
price increase will take the price of a bag of cement, which
currently sells for between $57 and $60, to between $62 and
Now, in my view, the fact that TCL has been ordered to
pay salary increases of nine per cent and backpay (by August
8) to workers for the 2009 to 2011 negotiating period may
raise some concerns about TCL s ability to continue in business
for much longer.
That s because in the notes to the company s 2013 annual
report, the following was stated under the rubric Going Concern:
"The group has reported a profit before taxation of $33.8
million (restated) for the year ended December 31, 2013 (restated
loss of $351.7 million in 2012) and there is $2 billion in out-
standing debt obligations as presented on the consolidated
statement of financial obligations as at $December 31, 2013.
"For the TCL group, debt service (inclusive of principal and
interest) is forecast to be $368 million for 2014 (2013:298
million). The key risks to the group s sustainability are declining
domestic markets and unexpected plant stoppages due to
technical problems with plant assets.
"Debt service as a percentage of budgeted group EBITDA
ranges from 67 per cent in 2014 to 55 per cent in 2018.
"The group s operating results in recent years have been
below the budgeted targets given the declining market demand
and plant challenges arising from constrained working cap-
"Based on current plans and strategies being pursued and
implemented the directors have a reasonable expectation that
the TCL group will generate adequate cash flows and profitability
which would allow the group to continue in operational
existence for the foreseeable future."
The three news developments and the statement---and it is
not clear from the annual report if it comes from the auditors
or the directors---raise a number of issues:
• Why did the company not make any provision for an
increase in salaries at its Trinidad operations in either the 2012
or 2013 annual reports, even at the level that they said they
could afford, which was three per cent?
• How much backpay will TCL be required to pay workers
on August 8 and by how much will TCL s monthly bills increase
as a result of the nine per cent increase that TCL has been
mandated by the Industrial Court to pay most of its work-
• Where will TCL get the money to pay backpay and higher
wages since the company has been reduced to paying its bills---
including, one must assume, its wages---from the cashflow
that is generated from the sale of its main commodity?
• How much money will the nine per cent increase in the
price of cement generate for TCL, especially in the context
of the company s very generous offer to all contractors registered
with the T&T Contractors Association of a three-month
waiver of the price increase for fixed priced contracts?
• If TCL s debt service is forecast to total $368 million in
2014---which is 24 per cent or $70 million more than the $298
million it paid in principal and interest in 2013---how will TCL
be able to manage to pay all of its current bills, higher salaries
and backpay for workers?
• If TCL is struggling to meet its current commitments, is
it paying enough heed to the capital requirements of maintaining
a cement company
• If TCL does not have the money to meet the backpay
requirements, will it simply not pay it---in which case it would
be in contempt of the Industrial Court---or attempt to appeal
the Industrial Court s ruling?
It is noteworthy that TCL had appealed to the Industrial
Court to be able to pay off the backpay in four quarterly install-
ments. This was roundly rejected by the Industrial Court which
insisted that TCL pay in full by August 8.
• It is noteworthy that TCL tried to tap the international
capital markets in May for US$325 million in senior secured
first lien notes but this was "postponed" after an ambitious
roadshow that took the TCL executives to five North American
• Also, it seems to me that if TCL is so cash-strapped, then
anytime it is an hour late with a payment, it runs the risk of
someone dashing to the High Court with a writ of bankrupt-
• In the circumstances, TCL may be tempted try a repeat
of what it did in 2011 when it declared a moratorium on its
debt service payments---almost daring its creditors to have it
declared bankrupt, in which case the creditors would have
had the responsibility to appoint a manager for the plants in
Trinidad, Barbados and in Jamaica.
But that tactic may not work in 2014 in the way that it did
three years ago because among the shareholders who have
joined together to remove six of the nine existing TCL directors
is a certain Mexican company called Cemex, which would be
able to take over the management and operations at Claxton
Bay in a heartbeat.
The fact that Cemex has joined with other institutional and
large individual shareholders is, in my view, the most important
aspect of the three TCL developments over the last week.
As everyone who follows TCL knows, in 2002, Cemex tried
to takeover TCL but just failed because it was not able to get
over the 75 per cent hurdle. Back then, the main persons who
were fighting to keep TCL local were Dr Rollin Bertrand, then
and now the managing director of TCL, and the company s
chairman Andy Bhajan.
In the corporate world, 12 years is an eternity and even those
who may have supported TCL and been against Cemex taking
over may have had a change of heart given the decline in
shareholder value in the last 12 years.
The other important point is that at the end of the day, a
publicly listed company is owned by its shareholders, who
have the right---in law and in fact---to nominate and vote for
It seems to me quite logical that if a majority of shareholders
have expressed a desire that the current directors should be
replaced by a new set, then in conformance with the precepts
of shareholder democracy, those shareholders must be allowed
to exercise their rights.
Put it another way, if shareholders who constitute a majority
of TCL s shares, say they don t want the six directors, why
are all of them not submitting their resignation letters? If the
owners of a company say they no longer have confidence in
the ability of the directors to manage the company s interests,
that s the end of the road, as far as I am concerned.
SOn a related note, someone who I have a great deal of
respect for was reminding me of an interview I did with Dr
Bertrand last July.
In that article, Bertrand said TCL s financial position today
is mainly due to the global and regional issues, and not any
big-picture mistakes that the company made.
"Strategically, we have not made any mistakes. If in 2005
when we were expanding Carib Cement (TCL s Jamaican sun-
sidiary), we knew that a global economic crisis was coming
and we still went ahead, then one could argue that we made
a strategic error.
"From where I sit, we were encouraged by our lenders, our
shareholders, by all of our stakeholders to expand and modernise
"We invested in our core business. We did not squander
any money. We went in to larger markets in order to improve
"So from a strategic perspective, I believe we have done the
right thing," Bertrand said.
Bertrand argued that many of the cement producers in the
world, such as Cemex, La Farge and Holcim were even more
harshly impacted by the reduction in infrastructural spending
that resulted from the 2008 "financial tsunami" than TCL.
I am not going to argue with Dr Bertrand on the financial
fortunes of cement companies. But it seems obvious to me
that none of the three companies he named---which are much
larger than TCL---are in anywhere near as much financial
trouble as the T&T company.
Will TCL directors stay?
CEO of TCL group
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