– interest rate for $30B bond pegged at 4.75 per cent

THE National Industrial and Commercial Investments Limited’s (NICIL) Special Purpose Unit (SPU) has been able to secure a 4.75 per cent interest rate on the $30B syndicated loan it negotiated to revive the ailing Guyana Sugar Corporation (GuySuCo).
Head of the SPU, Colvin Heath-London told reporters at a news conference hosted by Finance Minister Winston Jordan on Friday at his office that the bond, which was secured from syndicated banks led by Republic Bank, to aid in the revitalisation of the country’s sugar industry, will be delivered in two tranches.

He explained that the bond was borrowed for the Guyana Sugar Corporation (GuySuCo) and that entity is being treated as a business. According to London, syndicated banks give a loan or bond based on their prediction of how the identified business will perform in the future.

“It is not just a loan, but is a loan based on the prediction of the business in the very near future,” he said, noting that during negotiations, it was stated that the risk was spread around the local and regional financial sector so that the risk is wider across the region.
Heath-London said too that the SPU also insisted that in terms of building capacity, the legal fraternity in Guyana be involved.

“In the past it was the legal fraternity outside of Guyana who then contracted the local people. That is also to build local capacity for other future developments. After all the technical work was done, we were able to cap the loan at 4.75 per cent. That is because of how the risk was spread,” the SPU head told reporters.

As it relates to the tranches, he explained that the first tranche will amount to G$15B while the second will total US$75M. The United States dollar tranche, Heath-London said, is to facilitate capital injection and projects which he hopes would be implemented in GuySuCo in the near future.

The G$15B is geared at beefing up GuySuCo’s operations and to do some internal development and modification which he believes will put the industry in a good position for serious growth soon.

“The bond, we have a one-year moratorium, meaning that within a 12-month period we don’t have to repay or make any payments. We have an option that we can repay the bond within a five-year period which is GuySuCo and NICIL’s goal,” said Heath-London.
Additionally, he noted that the regional banking fraternity in examining GuySuCo’s plans for the future with respect to diversification or value-added products are “pretty confident” that within a three-year period the plan, if implemented in a timely fashion, will ensure GuySuCo is successful.
“By the end of the second year, we would be able to see if the industry is turning in a very positive direction,” the SPU head added.

DECENT RATE
Meanwhile, in response to critics, Minister Jordan made it clear that the syndicated bond secured by the SPU has a decent interest rate in comparison to other projects acquired under the former People’s Progressive Party (PPP) administration.
“When the last government borrowed from the syndicated Republic Bank to build the Marriott Hotel … what rate did they get the syndicated loan at?” he asked rhetorically, noting that the initial rate of the loan borrowed for the Marriott Hotel was 8.6527 per cent. When the APNU+AFC coalition government took office in 2015, it renegotiated the interest rate at 6.28 per cent.

“In the context of what he (Heath-London) is telling you there, he has gotten an even better rate,” said the finance minister.
“It is because when the hotel was about to be lost and the government was forced to come in to save the day that we renegotiated the loan and its terms, but by giving a government guarantee, we were able to bring it in at 6.28 per cent,” the minister continued.
That aside, he explained that when money is being borrowed for commercial or business purposes, it is different from borrowing money to build a school.

“The banks, even the multi-lateral banks will look kindly to you when the borrowing is in the context of what you call poverty reduction and poverty alleviation. It would be rare for multi-lateral banks to lend you money for operations that are business or commercial oriented. Those loans tend to be lent at market rates,” Jordan added while noting that nothing unusual has occurred.

The finance minister stressed that “GuySuCo is not a poverty place” and “will be deemed to be a business transaction”. “I do not know where, if the need of GuySuCo is for $30B, that you could go and borrow the loan at one per cent or two per cent interest rate.”
Both Jordan and Heath-London noted that opportunities have been given to the local banking system, private sector and National Insurance Scheme to participate in the deal, given the government’s guarantee.

Meanwhile, it is the plan of the company to start co-generation that would allow GuySuCo to earn revenues to produce electricity for the national grid, to get involved in sugar juices such as molasses and cane juice, additional packaging for concentrated markets and start “plantation white sugar”.
These projects, Heath-London said, will be different and viable income streams for the company.

The $30B is being sought over a four-year period to provide much-needed capital injection into the Albion, Blairmont and Uitvlugt estates. The sum is aimed at covering infrastructure maintenance, upgrades and development of new co-generation capacity to support operations of the estates and sell power to the national grid.
The SPU took control of the Skeldon, Rose Hall, Enmore and Wales estates, when government decided to close operations early this year in order to maintain the viability of the sugar industry.