For the last decade or so, this space has been a strong proponent of local institutions and individuals owning shares in this country's profitable public and private sector companies as a means of promoting long-term wealth generation in a way that could lessen inflationary impulses and mitigate the flight of capital from the country as a result of the dearth of high-quality local equity investments.
Over the years, the BG View column stoutly resisted the acquisition of RBTT Financial by the Royal Bank of Canada, but hindsight indicates that local investors may have got out of the bank at the peak in 2008 just before the global financial crisis and the Canadian owners are likely to have been blinded by the red ink on the balance sheet in the last seven years.
This column also promoted the sale of a stake in First Citizens and supports the sale of more shares in Phoenix Park Gas Processors–although not at the price the company's majority owner NGC has indicated it wants to sell it at.But the support for and promotion of local ownership is not blind and, hopefully, is not dumb:
�2 The support for the sale of Phoenix Park shares to local individuals and institutions is not unconditional but is based on the assumption that the share price reflects the reality of lower product prices and changes in the hemispheric market for propane, butane and natural gasoline;
�2 The reported proposal by Proman, which is now the majority owner of MHTL, that it intends to sell a 40 per cent stake in the Point Lisas Industrial Estate-based methanol producer to NIB, UTC and NEL was greeted with caution because of the lack of transparency of MHTL and due to the fact that the non-discounted reference price of methanol has declined by 52 per cent between January 2014 and January 2015.
The issue of tomorrow's meeting special shareholders' meeting of Trinidad Cement (TCL)–which was mainly called in order to remove the 20 per cent ownership cap–is a difficult one.As TCL chairman Wilfred Espinet made clear in an article in Thursday's Business Guardian, the cement company's creditors have made the removal of the 20 per cent cap a condition of its financial restructuring.
Now, it is clear to me that TCL will not survive without a further restrucuturing of its outstanding debt obligations, which were put at $1.8 billion (US$281 million) as at the end of September 2014 in the company's third quarter financial report.
TCL's existing annual debt service obligations amounted to $368 million, according to the notes of the financial report, whereas its operating profit before interest, taxes, depreciation and non-recurring items from continuing operations for the nine months until the end of September 2014 totalled $357.6 million.
If TCL is to continue to operate, it must find a way to reduce its annual debt obligations, especially as the next two years or so are expected to be a period of reduced construction activity by the State as a consequence of lower oil and natural gas export prices.
If I were a TCL shareholder, my thinking would be along the following lines: the company's creditors are not going to amend the terms of TCL's $1.8 billion debt without the removal of the cap; the company needs the financial space resulting from lower annual payments of interest and principle and the only way that space is possible is by restructuring the debt.
The alternative to not supporting the removal of the 20 per cent cap is the likelihood that one of the creditors would file to have TCL declared bankrupt (which technically it was when it failed to pay all of the interest it owed on September 30, 2014), in which case shareholders would be last in line to recover anything.
But it should also be made clear to shareholders that TCL intends to go straight from tomorrow's special meeting on the removal of the 20 per cent cap into a rights issue, through which the company will ask its shareholders to come up with an additional $320 million.
Shareholders at tomorrow's meeting will be told that if their choose not to purchase their rights, the value of their shareholding will almost certainly be diluted. And it should be fairly obvious to the TCL shareholders by now that if enough of them do not take up their rights, this opens the door to the Mexican cement giant acquiring more than 30 per cent of the company.
Subject to correction, but if one company acquires more than 30 per cent of a listed company that generally means that the acquiring company needs to make a takeover bid for the remaining 70 per cent shares.Finally, I have included the views of Rollin Bertrand, who was fired as the CEO of TCL last September, on this page quite deliberately.I would argue that Mr Bertrand has a curious approach to his 13-year stewardship over TCL.
He writes about the US$55 million escalation in TCL's debt as though he did not sign the original loan agreement with his eyes wide open.He accuses the new board of TCL of "pandering" to the OWTU when it should be obvious to even a primary school student that the company cannot operate without the goodwill and cooperation of its employees.
The accusation that the board handed out "generous settlements" to its workers is a bit rich coming from someone who locked the gates at the company's Claxton Bay headquarters and was forced to ensure a 92-day strike, which coincided with negotiations for the original restructuring.How clever was that, Mr Bertrand, and do you really think that your agreeing to a punitive debt restructuring and a strike gives you the right to speak on behalf of TCL shareholders?