Financial analysts are expressing concern over the announcement that the National Industrial and Commercial Investments Limited (NICIL) has secured a US$150 million (Gy$30 billion) bond to finance its administration of sugar estates.
It is a syndicated loan that will have to be repaid within five years at a rate of 4.75 per cent interest. The consortium of investors behind the bond comprise the National Insurance Scheme (NIS) and the Guyana Bank of Trade and Industry (GBTI).
According to financial analyst Dr Peter Ramsaroop, the repayment of this loan will have ramifications for Guyana’s oil revenues. He noted that while there has been talk of selling lands to repay the loan, the Guyana Sugar Corporation (GuySuCo) is already buried in over G$70 billion in debt. This, Ramsaroop noted, is almost three times the value of the bond.
“The US$150 million also has to be seen in the context of Guyana’s already increasing debt portfolio and diminishing revenue stream. Such a large loan is contingent on the successful turnaround of the now defunct estates,” Dr Ramsaroop has charged.
“It is dependent on a reduced debt portfolio and increased revenue streams—a reduced debt portfolio and increased revenue stream based on oil revenues. This in itself poses even more pitfalls,?” he expanded.
Dr Peter Ramsaroop
Dr Ramsaroop notes that the NIS will be expected to inject billions into the venture to recapitalize the remaining estates: Albion, Blairmont and Uitvlugt. According to Ramsaroop, the decision to arrange the loan should have never been taken in the first place.
“There is also the fact that, to sweeten the pot for the consortium, a Government guarantee has been given. This (is) in addition to the increasing of the debt ceiling in the National Assembly for loans to be guaranteed by Government,” he said.
“While the decisions have already exposed the treasury to billions in further liability, the move has now created a precedent,” Ramsaroop explained. “Precedents then set the stage for future similar transactions.”
Syndicated loan
It was announced a few days ago that NICIL had issued a US$150 million bond facility through Republic Bank’s investment banking division, in order to raise capital for GuySuCo’s operations. It was also stated that London House Chambers Attorney Devindra Kissoon had helped arrange the transaction.
The statement had explained: “With the issue, NICIL becomes the first public issuer to raise debt in the local capital markets in over 10 years. The bond is the largest ever bond facility arranged in Guyana, and was oversubscribed by local investors on the first tranche.”
NICIL had also explained that: “the bond will be issued in multiple tranches, with the first tranche of roughly G$17 billion, or US$85 million equivalent, being issued to local investors on Friday, May 25, 2018.”
According to NICIL, the money from the bond will be used towards capital expenditure and general operations for GuySuCo. But even with this US$150 million, there are still plans to raise a whopping US$65 million more to finance the complete revitalisation and recapitalisation process.
In its release, NICIL said it expects to raise the remaining sum, equivalent to G$13.6 billion, within the next few months through a combination of local and regional investors.
“A targeted road show is expected to be launched within the coming weeks that will likely include investor briefings in Trinidad and Jamaica” in order to raise the much needed funds, the release noted.
Repayment
Questioned during an exclusive interview on the GuySuCo repayment of the bond, SPU head, Colvin Heath-London, insisted that the SPU and GuySuCo were committed to ensuring that all the necessary repayments were made.
He had been adamant that strict adherence to financial best practices would be followed within GuySuCo, to ensure that there was no wastage of revenues secured by the sugar company from its ongoing operations.
But a source close to the SPU revealed that GuySuCo, with financial advice of NICIL and the SPU, would embark on a process that could see the company selling some G$3 billion worth of spare parts that were currently lying in its storage bond.
Also, a proposal has been made to secure another G$10 million by selling scrap metal sourced from around the company’s East Demerara Estates. This publication was told that over the next few months, GuySuCo would embark on the process of selling prime real estate not being utilised. Some 4600 acres would be up for grabs.
From that alone, it is understood, the SPU and GuySuCo hope to garner a whopping G$50 billion if sold at different intervals. Further, the Unit could seek to secure some G$265 million by selling GuySuCo lands in and around the Wales Estate.
