Over $7B disbursed to GuySuCo from $30B bond since 2018
– but NICIL unable to show bondholders, trustees how money being spent
By Jarryl Bryan
Since July 13, 2018, the National Industrial and Commercial Investments Limited (NICIL) has disbursed $7.420 billion to the Guyana Sugar Corporation (GuySuCo) in nine payments – without receiving evidence of how this money is being used by the entity.
This is according to NICIL’s Special Purpose Unit (SPU) Head Colvin Heath-London, who was at the time hosting a long-awaited press conference to update the media and the nation at large on the diversification of the sugar estates and the status of the $30 billion bond that was negotiated last year.
Four disbursements were made in 2018 and five this year. The last disbursement was also the largest, $1.442 billion on April 5, 2019. But according to London, GuySuCo has not been forthcoming with information on how the money is being used, something that is proving problematic for bondholders.
“When the bond was being negotiated with the bondholders, a plan was put forward and the bondholders agreed to a certain path forward on what the proceeds for the bond should be used for,” Heath-London explained.
“We’ve had challenges where the bondholders and the trustees are not happy with the information coming from NICIL. Because as part of the arrangement, we’re supposed to provide to the bondholders evidence of what the proceeds are being used for. We have not been able to do that to date. GuySuCo is still to provide that detailed information.”
According to Heath-London, the disbursements were supposed to meet operational needs like the payment of salaries. But if GuySuCo is not accounting for how it is actually using the monies, why did NICIL continue to disburse billions? According to Heath-London, they continued paying the money out of good faith and the need to continue financing GuySuCo as a going concern.
Heath-London noted that this situation and the general friction between NICIL and GuySuCo are not good in the long term for Guyana. He pointed out that should they default on repaying the bond, the bondholders can decide to levy on NICIL’s assets.
The assets in question, Heath-London explained, would include entities like Guyana Oil Company (Guyoil) and the Marriott Hotel, which NICIL administers through the Atlantic Hotel Incorporated (AHI).
“This standoff affects Guyana’s financial credibility on the regional and international markets. Because as simple as we may think this transaction is, there are a lot of financial institutions that are plugged in to how Guyana is operating under this bond. And whenever we go into the financial market for a bond, they may treat us the way they perceived how we operated with this bond. So it affects future funding for projects.
“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 trustees for this,” Heath-London further explained. “So, we are working to bring this situation under control.”
Nor is Heath-London the only one feeling the effects of lack of information. At the press conference, PricewaterhouseCoopers (PWC) Managing Director Wilfred Bhagaloo revealed that GuySuCo did not supply crucial information for the valuation process.
“The challenges anchor around information we need from GuySuCo – financial information for each of the estates. To date, I have not received that. I’ve received audited accounts for GuySuCo. That’s one thing. I need information on each of the estates,” Bhagaloo said.
“The valuators need information on major equipment: who are the suppliers, the last time the equipment was maintained. In relation to Skeldon, we need the agreement with the manufacturers. Our colleague valuators in San Francisco need that kind of information to benchmark and make calculations as to the current value of the equipment. Nevertheless, we proceeded with our work.”
According to the agreement between NICIL and Hand-in-Hand Trust Corporation as the Trustee, the first tranche payment of $16.5 billion from the bond was to be used for long-term project and capital financing for GuySuCo.
Specifically, the money was to be used to acquire two co-generation plants, upgrade the existing factories to produce plantation white sugar, build storage and packing facilities and to help pay for two years of general operational costs.
The bond was arranged last year by Republic Bank Limited, through its Investment Banking Division, with law firm London House Chambers headed by Devindra Kissoon acting as a transaction attorney.
It was arranged at a rate of 4.75 per cent interest. A source close to the Finance Ministry had told <<<Guyana Times>>>> that while the interest rates secured would appear to be very favourable, the implications of failing to consistently repay the bond and related interest rates would be dire.
“This is a very serious undertaking and Guyanese must watch closely at the consequences for (Special Purpose Unit) SPU/NICIL, GuySuCo and the country if Guyana defaults on its payments to those local and regional commercial entities that granted the $30 billion bond,” the source had emphasised.