GuySuCo secures $30b in bond financing

The cash-strapped Guyana Sugar Corporation is expected to soon begin tapping a $30B syndicated bond which it has secured from a group of local and regional banks for the revitalisation of its remaining sugar estates.

“It is a syndicated bond, thirty billion Guyana [dollars], from not only local but regional banks and we expect to start [collecting on it] in two weeks,” Head of the Special Purpose Unit (SPU) under government holding company, NICIL, Colvin HealthLondon, told Stabroek News yesterday. The SPU has been entrusted with overseeing GuySuCo and its assets.

“This money is only for GuySuCo’ s (retained) estates, I want to make that very clear,” he added while explaining that the $30B will be collected in “staggered” payments.

When the money begins to be released in the next two weeks, Heath-London said it will immediately be streamed to meet GuySuCo’s objectives in revamping the remaining three estates.

The taking on of bond obligations by the debt-ridden GuySuCo will raise eyebrows among industry stakeholders. The terms of the bond agreement have not so far been released and will likely have to be tabled in Parliament.

The SPU has said that GuySuCo needs $30B, over a four-year period, to provide a much-needed capital injection, support infrastructure maintenance and upgrades at the Albion, Blairmont, and Uitvlugt estates, which the state is keeping, and develop new co-generation capacity to support estate operations and sell to the national power grid.

This newspaper understands that Republic Bank (Guyana) Ltd, the Guyana Bank for Trade and Industry and other local banks are participating in the syndicated bond. There is also regional input. Sources say that the rate on the bond is low and that there is also a debt restructuring component.

One financial expert explained that generally government bonds are auctioned but when they are syndicated there are a number of banks that agree to undersign.

“When we are looking at a syndicated bond it is in the sense they put together a number of parties, but it is referred to mainly as a government bond. It is supposed to come out in the currency of the borrower. The banks, here in this instance, promise to buy the bond if there is not enough activity in the market. Banks coming together to underwrite the government debt and they are prepared to operate at a low margin which is the difference in which they bought it and are selling,” the financial expert explained.

“In this instance, by them syndicating it means it would have collateralised the debt and it will not be a burden to your government. There is a small margin because of the (certainty) that the banks will recover their monies. Your GuySuCo is not high risk, it is very low risk, because while I don’t know the exact value of GuySuCo, I know it is worth a lot more than thirty billion dollars. So you see, the small margin comes about because the bond is backed by the collateral,” the business analyst added.

The expert believes that while it was determined that some estates would be closed, the Guyana Government erred in closing them before they were valued and that they should have been left operational for potential buyers to see or sold as going concerns.

According to the SPU, PricewaterhouseCoopers (PwC), the international financial services provider working on the valuation of the GuySuCo assets now under the control of the SPU for privatisation, had also expressed concern over the estates not being operational. SPU, stated that PwC stated that it is concerned that in order to attract the best investors and secure the highest price for the estates, they need to be seen as fully functioning operations and facilities.

“Closed estates will not be attractive to potential investors. The (proposed) deal with DDL (Demerara Distillers Limited), if approved by the boards of DDL and NICIL would allow the SPU to meet the PwC recommendations for a quality privatisation of the estate,” a statement from the SPU last month said.

Both government and GuySuCo have been hammered for an unclear policy on the sugar industry as evidenced by the announcement that limited operations would resume at several of the estates. After shutting the estates, money now has to be spent to reopen and re-employ workers.

Grinding resumed last week at the Enmore Sugar Estate factory, in a bid to make use of cane in the fields and to attract prospective investors as per the SPU’s and GuySuCo’s plans.

The factory was closed in December last year after GuySuCo shuttered the Enmore, Rose Hall and Skeldon estates in preparation for their divestment.