Aleem Khan

Fi­nance Min­is­ter Lar­ry Howai says the Gov­ern­ment has re­ceived as­sur­ances that the fi­nan­cial trou­bles be­ing ex­pe­ri­enced by the lead con­trac­tor on the high­way to Point Fortin, Con­stru­to­ra OAS of Brazil, will not im­pact the com­pa­ny's abil­i­ty to com­plete the project that has been be­set by con­tro­ver­sy, in­clud­ing a hunger strike by en­vi­ron­men­tal cam­paign­er, Wayne Kublals­ingh.

On Wednes­day, the par­ent com­pa­ny of the con­trac­tor on the $7.5 bil­lion high­way project from San Fer­nan­do to Point Fortin was swift­ly down­grad­ed by two of the world's lead­ing rat­ing agen­cies af­ter the com­pa­ny could not pay US$16 mil­lion in­ter­est on US$400 mil­lion bonds ma­tur­ing in 2021.

Speak­ing in Par­lia­ment on Fri­day, Howai said: "There has been a pre­lim­i­nary meet­ing be­tween NID­CO and the con­trac­tor in con­nec­tion with that. I am told that NID­CO has re­ceived cer­tain as­sur­ance as far as that is con­cerned."NID­CO is the Na­tion­al In­fra­struc­ture De­vel­op­ment Com­pa­ny Ltd, the state en­ter­prise that is the ex­e­cut­ing agent for the Gov­ern­ment, which re­ports to the Min­istry of Works and In­fra­struc­ture.

The Fi­nance Min­is­ter said that he has not been able to go in­to the mat­ter with the line min­is­ter for the project, Works and In­fra­struc­ture Min­is­ter, Su­ruj Ram­bachan. But he said that Ram­bachan has not sig­nalled to him that "there is any im­me­di­ate is­sue that we need to at­tend to."

Asked whether the slow pace of Gov­ern­ment pay­ments to Con­stru­to­ra OAS had con­tributed to the fi­nan­cial prob­lems that the par­ent com­pa­ny now finds it­self in, Howai said: "I can't an­swer that ques­tion. I am not re­al­ly up to date in terms of where we are on the sta­tus of the pay­ments to OAS. As far as I am aware, we have made all of the fund­ing avail­able to NID­CO that they need."

Howai added: "Cer­tain­ly noth­ing has come to me, since the be­gin­ning of De­cem­ber to now, that would sug­gest that we are very far in ar­rears of pay­ments to OAS,"On­ly on Wednes­day, Howai told the Fi­nance Stand­ing Com­mit­tee meet­ing in the Par­lia­ment Cham­ber that the Gov­ern­ment may have to bor­row mon­ey to fund the com­ple­tion of the high­way project.

"Giv­en what is hap­pen­ing now with oil prices, we may need now to con­sid­er go­ing in­to the mar­ket to bor­row the funds and if we need to do so, we will do so," Howai said, re­spond­ing to a ques­tion from Point Fortin MP Paula Gopee-Scoon. He told Par­lia­ment on Wednes­day that "up to the time when we did this par­tic­u­lar trans­ac­tion, we were able to fund it out of our ex­ist­ing cash flows," as the Gov­ern­ment's trea­sury de­posits had been suf­fi­cient to meet the re­quired costs.

Howai said when the Gov­ern­ment start­ed the project "there was no need to in­crease gov­ern­ment's bor­row­ing, giv­en the fact that through our trea­sury de­posits we had fund­ing that would have been suf­fi­cient to meet the re­quired costs."In the in­ter­view on Fri­day, Howai said that the Gov­ern­ment had tapped the lo­cal cap­i­tal mar­ket for a $1.5 bil­lion bond, which would have closed on De­cem­ber 24, in or­der to make pay­ments to the con­struc­tion com­pa­ny.

Ques­tioned on why the Gov­ern­ment would be seek­ing to bor­row mon­ey to com­plete the project now, when it start­ed fund­ing the project from the Trea­sury, Howai said: "With the fall in oil and nat­ur­al gas prices and po­ten­tial­ly what could hap­pen with cash­flows, I want to be care­ful in terms of run­ning down our cash now. It is im­por­tant for us to en­sure that we have good cash re­serves go­ing in­to this par­tic­u­lar pe­ri­od of time.

"Al­so, I in­her­it­ed the whole is­sue of the trea­sury de­posits when I came in. For last year, I said we would go ahead with it, but we have been look­ing at all of the op­tions avail­able to us in the last 18 months or so.To­wards the end of last year, I de­cid­ed that we should not use trea­sury de­posits at all, but that we go out and get the fund­ing for it sep­a­rate­ly."

The Fi­nance Min­is­ter ex­plained that a trea­sury de­posit is a sub­set of the Con­sol­i­dat­ed Fund, which is a seper­ate short-term ac­count in­to which funds that the Gov­ern­ment col­lects goes in­to. He said in Gov­ern­ment ac­count­ing terms, with­drawals from the Trea­sury De­posit Ac­count are treat­ed like a loan, which ac­count­ed for the shift­ing of monies from oth­er min­istries to re­pay the trea­sury de­posit.

Howai said he would need to check with the Min­istry of Fi­nance's bud­get di­rec­tor be­fore an­swer­ing a ques­tion on the amount of mon­ey that is in the Trea­sury De­posit Ac­count.In re­sponse to an emailed Guardian query, OAS spokesper­son Mil­ton Pazzi Jr said: "OAS S.A. in­forms that the re­cent down­grade of its rat­ings is not con­nect­ed to the T&T high­way project, which is per­formed by Con­stru­to­ra OAS.

"Ad­di­tion­al­ly, Con­stru­to­ra OAS in­forms that the event does not im­pact the per­for­mance of the com­pa­ny's du­ties on the project, since it is self-suf­fi­cient in terms of cash-flow."Con­stru­to­ra OAS has been as­sured that NID­CO is com­mit­ted to make all pay­ments with­in the due dates, and ac­cord­ing to the con­tract terms."

Fol­low­ing OAS' an­nounce­ment that it did not pay its bond in­ter­est, Fitch Rat­ings was the first to down­grade Con­stru­to­ra OAS to 'RD' from 'C,' which means the rat­ing agency con­sid­ers the com­pa­ny to be low­er than "junk" or "non-in­vest­ment grade," and tech­ni­cal­ly "in de­fault" of its debt pay­ments.

Fitch said: "These down­grades fol­low the an­nounce­ment by OAS that it did not pay the prin­ci­pal and in­ter­est on its 9th deben­tures is­suance, in the amount of 103 mil­lion Brazil­ian re­als, due Jan­u­ary 5.

"On Jan­u­ary 2, 2015, Fitch down­grad­ed of the group's rat­ings to 'C'/'C(bra) fol­low­ing the an­nounce­ment by OAS that it did not pay the in­ter­est on its US$400 mil­lion se­nior un­se­cured notes due 2021 in the amount of US$16 mil­lion, is­sued by OAS Fi­nance Ltd, thus en­ter­ing the 30-day cure pe­ri­od. This is­suance is guar­an­teed by OAS SA, Con­stru­to­ra OAS SA and OAS In­ves­ti­men­tos SA."

The rat­ing agency added: "Ab­sent a ma­te­r­i­al new event, OAS SA and its sub­sidiaries are like­ly to de­fault on their debt in the near fu­ture. Fitch con­sid­ers the agree­ment of all cred­i­tors to rene­go­ti­ate their debt as un­like­ly," .

About an hour af­ter Fitch, Stan­dard & Poor's–cit­ing the same fail­ure "to make a prin­ci­pal and in­ter­est pay­ment, this time on its ninth deben­ture is­suance" - said: "As a re­sult, we are low­er­ing the glob­al scale cor­po­rate cred­it rat­ing on OAS to 'D' (for de­fault) from 'CC'. At the same time, we are low­er­ing the na­tion­al scale rat­ings on the com­pa­ny to 'D' from 'br­CC/brC'."

S&P added: "We are af­firm­ing all oth­er is­sue-lev­el rat­ings and keep­ing them on Cred­it­Watch with neg­a­tive im­pli­ca­tions where we placed them on Jan­u­ary 2, 2015, re­flect­ing our ex­pec­ta­tion that, al­though the com­pa­ny has not yet missed any pay­ment nor has it de­clared a for­mal de­fault as a re­sult of ac­cel­er­a­tion claus­es on this debt, de­fault is al­most cer­tain."

S&P said: "It's high­ly like­ly the com­pa­ny will face a gen­er­al de­fault, there­fore, all out­stand­ing debt would like­ly be sub­ject to an on­go­ing re­struc­tur­ing process. Ad­di­tion­al­ly, we don't ex­pect the com­pa­ny to make the missed in­ter­est pay­ment on the 2021 notes (due Jan­u­ary 2, 2015) with­in the 30-day cure pe­ri­od."

OAS SA, the par­ent com­pa­ny of the firm build­ing the Point Fortin High­way, is one of sev­er­al Brazil­ian con­struc­tion com­pa­nies that are em­broiled in a cor­rup­tion scan­dal in­volv­ing Brazil's state-op­er­at­ed oil pro­duc­er Petro­bras.Brazil­ian of­fi­cials al­lege that the con­struc­tion com­pa­nies used bribery to ob­tain con­tracts from the oil pro­duc­er.