-Gov’t says treasury incapable of providing a bailout at this time

THE Novel Coronavirus (COVID-19) pandemic and other prevailing national conditions have rendered the national treasury incapable of providing a bailout to the “cash-strapped” Guyana Sugar Corporation (GuySuCo), but all hope is not lost, as the company is expected to benefit from $1.5 billion, paid to The National Industrial Commercial and Investment Limited (NICIL) for the sale of land.

In a letter to President David Granger on May 15, close to a month ago, Chairman of GuySuCo’s Board of Directors, John Dow, said the sugar corporation was in a “dire financial crisis” with billions in debt, and insufficient finances to execute critical factory maintenance.
“Despite improvements in the productivity of cane, GuySuCo’s sugar production for the last two crops has fallen short of expectations and the current COVID-19 pandemic has exacerbated the problems experienced in meeting the 1st crop 2020 production targets…As a result, the cash generated from operations cannot meet the ‘outgoings’ particularly when external funding has been difficult to obtain,” Dow said as he painted a vivid picture of the financial challenges facing the sugar industry.

The Ministry of Finance has since noted GuySuCo’s request for a bailout, and has assured that it is actively seeking to assist the company in accessing funds that are available, to mitigate its present challenges.

To this end, the ministry cited a $30 Billion bond backed by NICIL’s assets and guaranteed by the Government of Guyana, which was secured through NICIL to retrofit and revitalise the three remaining sugar estates.

During the period July 2018 to February 2020, $9,720,759,568 was disbursed to GuySuCo to fund its capital and operational expenditure – much of which was outside the terms of the bond.

Additionally, NICIL, through the Special Purpose Unit (SPU), sold lands that were vested to it, and as such garnered deposits of $2.1 billion.

According to the finance ministry, the full sum was used to offset bond payments that became due in May, 2020. And, the balance of $1.5 billion for the lands will be paid over to NICIL when the vesting orders are signed and gazetted.

“It is expected that part of this sum will go towards a bond repayment which is due on July 4, 2020, and the remainder to GuySuCo. GuySuCo also generates its own income.

“Another disbursement is expected in the coming days; so we urge that NICIL, GuySuCo and the syndicated lenders work assiduously to resolve any bottlenecks,” said the finance ministry
Guyana Chronicle had reported that the plan for GuySuCo in 2017 consequent to the laying of the State Paper in Parliament was premised on the 4,650 acres of commercial land being sold and the funds being made available for the rehabilitation of infrastructural and the necessary capital for factory and agricultural equipment.

And though the SPU of NICIL successfully secured a Bond of G$30B, only G$17B has reportedly been raised to date.

Dow told the President that notwithstanding the purpose of the Bond, the proceeds from the sale of commercial lands were not remitted to the Corporation and apart from sales income, the Bond has been the only source of funding for the industry’s priority programme.

“GuySuCo has, since January 2019, been urging NICIL/SPU to change the purpose (“caveats”) of the Bond to be in line with our requirements. To date, NICIL/SPU has been unwilling or unable to get this done,” Dow complained.

He added: “The Bondholders, without a change of caveats, have apparently been insisting that no further disbursements be made from the Bond as GuySuCo’s request does not fit the stated purpose on which the bond was raised.”

“Cash will not be available to meet any ‘outgoings’ for spares and materials for the mid-year out-of-crop maintenance of our factories. This inability to purchase spares and materials is likely to result in factory performance in the 2nd Crop 2020 being adversely affected with increased factory downtime, reduced sucrose extraction at the milling plant and low sugar and molasses production.

Further to that, he disclosed that there was a backlog of G$2.1B owed to creditors. Due to the corporation’s inability to pay creditors on time, many of its experienced contractors have become unwilling to tender for GuySuCo projections, and creditors have been demanding large upfront payments before supplying goods. However, given its financial woes, it is unlikely, Dow said, that the creditors will grant further credit.

“If some of the crucial creditors are paid, GuySuCo would be out of cash before the 2nd week of June,” he noted.