JMMB to underwrite TCL US$325-m bond float

Wednesday, May 07, 2014    

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TRINIDAD Cement Limited (TCL) is floating a bond to raise US$325 million ($35.8 billion) to refinance debt and boost its working capital.

The private placement offer, which will close this month and which is being made to investors in Trinidad and Tobago, the US and Canada, is being underwritten by Jamaica Market Brokers (JMMB).

GMP Securities and Byron Capital Markets are expected to act as joint bookrunners, along with JMMB.

In its notice of intent, TCL said that US$295 million from the proceeds would be used to repay debt.

The cement maker, which is the majority shareholder of Caribbean Cement Company in Jamaica, has TT$2.1 billion, or approximately US$330 million in non-current liabilities on its books at the end of March.

"The remainder of the proceeds of the offering is intended to be used for working capital improvement and to pay all fees and expenses associated with the offering," said the notice of intent.

TCL's working capital stood at TT$127 million as at March 31, 2014.

The senior secured first lien notes are expected to have a tenor of seven years, maturing in 2021, while the interest rate is to be fixed and paid on a semi-annually basis.

Fitch Ratings on Monday gave TCL Group a 'B-' rating because it operates in the relatively small Caribbean cement market, it is highly leverage, has weak liquidity, and faces volatility of its cash flow generation due to the cyclicality of the cement industry.

"Fitch believes the company will be able to slowly deleverage, as operating cash flow should continue to improve as volumes and sales prices increase," said the ratings agency in a press statement issued Monday. "Further factored into the ratings is the favourable outlook for the Caribbean cement industry over the medium term driven by the region's positive macroeconomic and business environment."

Indeed, all planned maintenance stops for the Trinidad plant has been completed and increased production rates across the plants, including in Barbados and Jamaica, should result in better financial performance over the rest of the year.

Over the last three quarters profit levels at TCL have been depressed -- even though the TT$13-million net profit for the first three months of 2014 was better than the TT$12- million loss reported for the last quarter of 2013, it was still well below the TT$56 million it recorded in the second quarter last year.

And while its subsidiary in Jamaica increased its prices six times in the last 16 months -- pushing up the average cost of cement by 30 per cent over that period -- Carib's profitability has been dwindling since it returned to profitability last June.

The locally-based company posted net profit of $360 million for its second quarter ending June 30, primarily as a result of debt forgiveness by its parent company.

But its $36-million bottom line figure for the first quarter of 2014, reflected continued decline from the $170-million net earnings in the three months to September 30, 2013, and $82-million net profit in the last quarter of 2013.





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