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TCL delays bond sale after roadshow

Friday, May 23, 2014

Although Trinidad Cement Ltd (TCL) has a final order book of US$389 million for its bond sale, the company is now advising shareholders that it will await more favourable market conditions to sell US$325 million of seven-year bonds to help pay down debt. TCL said in the May 20 notice to shareholders: “The transaction documents were sent to over 500 institutional investors across North America and the Caribbean ending with a final order book of US$389 million. Some investors requested modifications to the proposed coupon and covenant package, which were considered by the TCL board. 


“After evaluating the order book, the TCL Board decided to postpone the refinancing and await more favourable market conditions, which are expected in the near future. It is believed that such improved market conditions would provide a package more consistent with the group’s development strategies going forward.” In the first quarter of 2014, the TCL Group told shareholders it received four unsolicited proposals to refinance the group’s US$300 million debt. Three of the proposals recommended accessing the buoyant US high-yield bond market which the group was advised, had the depth to refinance the existing debt at lower interest rates, facilitating improved cash flow and more flexible covenants. 

TCL said it was also advised that the debt and capital markets in the Caribbean are too thin to handle this level of refinancing. After evaluating the proposals, including proposals from two major Wall Street firms, the TCL board elected to move forward, the statement said “on the basis of an approved interest rate target and engaged a syndicate of underwriters comprising GMP Securities LP, Byron Capital Markets, and Jamaica Money Market Brokers Ltd (JMMB)”. “This syndicate was selected since it was the only one that could offer a TT dollar tranche. Tapping the TT dollar market was considered an important part of the refinancing strategy, as bonds sold in T&T would not attract withholding tax and would provide a hedge against foreign exchange risk.”


Following what TCL described as “a lengthy process of due diligence and documentation, including advice from the underwriters as to expected coupon range and covenants, TCL launched a roadshow to potential investors in the US, Canada and T&T from May 6-16. The roadshows were conducted in New York, Boston, Toronto, Cincinnati, Los Angeles, Minneapolis and Port-of-Spain. The statement said: “On the roadshow, TCL Group executives received valuable feedback about the group’s business and alternative strategies for refinancing the existing debt as a first-time issuer.” TCL’s bonds were speculative-grade rated, receiving a “B” with a “stable outlook” by Standard & Poor’s and “B-” with a “stable outlook” by Fitch Ratings.


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