Bankers now see Petrotrin as very risky and have made an attempt to get a “Government guarantee” of $1.2 billion within seven days to cover debt the company owes, Finance Minister Colm Imbert said last evening.
Imbert said he had no choice but to sign the guarantee, which will increase public debt by the same amount immediately, but noted this will put Government under pressure if Petrotrin does not continue its restructuring.
Imbert was speaking at an impromptu media conference in the Parliament hours after the Industrial Court granted an injunction to the Oilfields Workers’ Trade Union (OWTU) preventing Petrotirn from terminating workers.
In explaining a Government guarantee, Imbert said it is when bankers don’t think a company can pay its debt.
“That is so in default they can come to the Government to get the money. If we do not sign it they will ask Petrotrin to pay in cash immediately,” he said.
Imbert said in a letter issued by three bankers and received by his ministry’s Permanent Secretary, they were informed that Petrotrin had three financing facilities which need to be refinanced or rolled over on or before October 15 in the sums of US$100 million, US$50 million and US$22.2 million—which was equivalent to TT$1.2 billion.
“At this point in time, bankers don’t see Petrotrin making its payments unless something is done to reduce loss-making areas in the company. Until that is done they will continue to come to the Government for guarantees,” Imbert said.
He said if he did not sign the Government guarantee this time the company would implode or collapse, as it will not be able to pay its bills and “essentially not be able to continue.”
Imbert also said recently there was a cargo of crude oil that had to be discharged to run the refinery and that cargo required US$56 million (TT$400m). He added that the last shipment of crude oil was on October 5 and the company could not continue to purchase crude oil.
“It is simple…they do not have the ability to do that anymore.”
He read the last line of the letter, which he described as “instructive.”
“Please be advised that Petrotrin is currently facing severe liquidity constraints. As lenders continue to demand guarantees and traders demand letters of credit before cargoes can be discharged, as we navigate these challenges and forge forward, unforeseen events still serve as impediments to preserving cash. In this regard, Petrotrin may seek assistance from the ministry for additional guarantees but these requests can only be communicated as events unfold.”
Imbert said should they get another letter requesting a Government guarantee it will be a matter for the Cabinet to discuss and decide on the way forward and they may also seek to consult with the population.
“The company cannot survive without Government guarantees and they will no longer be importing oil for the refinery so that it will inevitably stop producing gasoline and diesel because there will be no raw material to feed the refinery to produce these refined products,” Imbert said.
In seeking to address the Industrial Court’s granting of the injunction to the OWTU, Imbert said he hopes the court “will deal with this quickly because we need clarity on the way forward.”
“If the company is not allowed to proceed with its restructuring and shed its loss-making entity, then this is what is going to happen…we will be forced to give more and more Government guarantees which will destroy our credit rating. It will affect the entire country as a whole,” he said.