…but NICIL says information on “spending” not forthcoming
TO date, the Guyana Sugar Corporation (GuySuCo) has received $7.4B from the $30B bond intended to recapitalise its operations, but it is unclear whether the money is being used for its intended purpose. According to the National Industrial and Commercial Investments Limited (NICIL), the state-owned company that secured the bond on behalf of GuySuCo, the financial information is not forthcoming.
NICIL’s Acting Head, Colvin Heath-London, during a press conference at his Camp Street Office on Monday, disclosed that a total of nine bond disbursements were made to GuySuCo between July 13, 2018, and April 5, 2019, totalling $7.4B. GuySuCo has since requested an additional $1B.
But while disbursements have been made to GuySuCo, the bondholders and trustees are not pleased, according to Heath-London. “The bondholders and the trustees are not happy with the information coming from NICIL; because as part of the arrangements, we are supposed to provide to the trustees and the bondholders evidence of what the proceeds from the bond are being used for; we have not been able to do that to date. GuySuCo is still to provide that detailed information,” Heath-London told reporters.
He clarified that while GuySuCo has provided a broad overview of how the monies are intended to be spent, a detailed financial report on each disbursement has not been submitted to date.
According to the Trust Deed signed on May 24, 2018 between NICIL and the Hand in Hand Trust Corporation Inc., “ the net proceeds from the issue of the Bonds shall be applied exclusively by the Company towards financing of the Guyana Sugar Corporation’s long-term project and capital expenditure to acquire two co-generation plants, to upgrade existing factories to produce plantation white sugar, to build storage and packing facilities, as well as to contribute for two years towards general ongoing operational costs.”
However, thus far, GuySuCo has reportedly requested monies to cover operational expenses, such as payment of salaries. “We are still awaiting confirmation on what the monies were actually used for as the bondholders have recently requested from us,” Heath-London posited.
Nonetheless, he said NICIL, in “good faith” has been releasing finances to GuySuCo. Heath-London said given the meeting with President David Granger and the Finance Minister Winston Jordan and Agriculture Minister Noel Holder, he is optimistic that there will be a change in the situation. But he admitted that this is not in keeping with international best practices.
“It is not in keeping with financial best practices. We fall outside of the realm of financial best practices,” he posited. Heat-London said at this stage it is important to resolve the issues surrounding the release of critical information ought to be provided to the bondholders and trustees.
“As it is, if we continue this way, we are pushing NICIL and, by extension, the Government of Guyana in default, and we have been written, and we have been chided by the bondholders and the trustees to this effect. So we are working to bring the situation under control,” Heath-London said.
According to him, the “standoff” affects Guyana’s creditability on the regional and international markets. “As simple we may think this transaction is, there are a lot of financial institutions, regional and international, that are plugged into how Guyana is operating under this bond, and whenever we may go into the market or the financial space again to tap into funds, they may treat us based on how they perceive we operate bond,” he opined.
Heath-London said all questions relating to GuySuCo’s failure to submit the requisite information must be directed to that corporation and the Agriculture Minister, Noel Holder.
It was pointed out too that the bond is “backed” by NICIL’s assets and not those belonging to GuySuCo. “The bond in no way, shape or form backed by any of GuySuCo’s assets, it is a purely NICIL bond, and whatever happens on the default on this bond, it would be the NICIL’s assets and subsidiary that would suffer from that default,” Heath-London explained.
Nonetheless, he said that NICIL was able to make its first interest payment to the tune of $783.750M on May 22, 2019. NICIL procured the $30B Syndicated Bond based on the advice of the funding requirement for a specific plan to recapitalize GuySuCo.
“This plan included the procurement and development of co-generation and plantation white plants at the Albion and Uitvlugt Estates. Prior to procuring the bond, the plan was discussed and agreed to by both NICIL and GuySuCo over the course of many months in 2017-2018,” NICIL said in a statement issued at the press conference.
Notably, NICIL said the bond was entered into with the recognition that the agreed activities would have enabled GuySuCo to generate enough funds to put NICIL in a position to repay the bond in the stipulated time period. “GuySuCo now intends to use the money for different purposes and NICIL has not been given any evidence by GuySuCo that the alternative set of activities will generate funds at the rate and in the amount that assures NICIL it would be able to repay the bond in the agreed time frame,” NICIL said.
