Jun 26, 2021 News
Kaieteur News – Former Minister of Finance under the previous APNU+AFC Administration, Winston Jordan, has moved to “justify” why his government had used proceeds from a $30B (US$150M) bond for the Guyana Sugar Corporation Inc. (GuySuCo), to repay the lenders.
Jordan’s explanation came immediately after Kaieteur News reported on Wednesday that the “Coalition used $30B GuySuCo bond to repay lenders.”
It was the current Senior Minister in the Office of the President with Responsibility for Finance, Ashni Singh, who had told the National Assembly during the 29th Sitting of the 12th Parliament that the APNU+AFC were “servicing the bond from the proceeds of the bond.”
His exact words to the House were, “It might be worthwhile to note Sir (the Speaker of the House, Manzoor Nadir) that when we came into office, we discovered a rather astonishing situation, that NICIL was actually servicing the bond out of the proceeds of the bond…”
The very next day (Thursday), former Finance Minister responded to the Kaieteur News article during a telephone interview with an online media programme called KAMS TV.
Jordan started by saying, “It is true that some monies from the bond were used to make two payments to the bond holders but let’s see why they (NICIL) had to do that, lets back track a little bit.”
After giving a brief history of when the bond was secured, why it was secured and how his government had planned to repay the bond holders, the former Finance Minister noted that they are two main reasons or setbacks that “forced” NICIL to use “some” of the bond proceeds to begin repaying the lenders.
Those two main reasons, according to the former Finance Minister, were the December 2018 No Confidence Motion and certain threats made by the then opposition, the People’s Progressive Party/Civic (PPP/C).
Jordan began his explanation of how the “two reasons” played a major role is causing NICIL to make such a move by detailing some aspects of the then government’s 10-year-plan to revitalise GuySuCo and make it a profitable company. He said that the company was in a terrible financial state and had a deficit of $90B and “no bank” wanted to loan GuySuCo any money.
As result, Jordan continued, his government had made a decision to restructure the company and that was to close four non-profitable sugar estates and leave three profitable ones in operation.
“That restructuring meant that the three profit making estates, Albion, Blairmont and Uitvlugt would remain (in operation) and we will seek to improve the efficiency of these estates and hoping that by 2023, 2024 or thereabout they will be able to be profitable undertakings producing roughly, 150,000 or thereabout tonnes of sugar and GuySuCo engaging in other activities like cogeneration and so forth,” he told KAMS TV.
He added, “And the estates, Wales, Rose Hall, Skeldon and Enmore, those will be closed and these entities would be divested or diversified as the case may be.”
In order to improve the efficiency of the three estates, the former minister said, funds were needed. He said that GuySuCo had suggested that it would need some $55B over a ten-year-period to bring the “proposal” into “fruition.”
The plan was, according to Jordan, that “a large chunk,” of that amount would have been a capital investment programme. He calculated that it would have been “roughly” around $37B from 2018 to 2023.
To meet the $55B, he related that his government had planned to give GuySuCo $8B and a remaining $48B would have been available to the company by “divesting the four non-profitable estates.” In simple terms this means that the coalition planned to sell the estates just to raise the $48B.
In fact, the coalition had hired an international British Company, PricewaterhouseCoopers (PWC) to evaluate the state properties for divestment.
Jordan said that the divestment of Guyana’s assets would have taken a while, so a decision was taken to seek bridge financing for improvement of the three “profitable estates.” Bridge financing is an arrangement whereby a borrower is loaned a sum of money for a short period time until the borrower can source money from somewhere else.
To source the bridge financing, the former Finance Minister said, NICIL entered a $30B bond agreement in May 2018 and had planned to repay it with the proceeds from the sale of the four non-profitable estates. Part of the agreement was that the bond would be disbursed to NICIL in two tranches. Jordan related that a first tranche of $16.5B and another $1.1B from the second tranche was handed over to the state company.
However, he said, the plan to repay the bond from the sale of estates fell through because the December 2018 No Confidence Motion “disrupted the process.” The former Finance Minister further claimed that there were also threats from the PPP/C opposition that “poisoned the atmosphere,” scaring away potential buyers.
“Secondly, there were threats from the opposition of taking back anything that was sold or taking them to court or whatever, criminalising the whole process and so, and soon after the whole thing collapsed,” he stated.
When Kaieteur News asked him yesterday to disclose who these “potential buyers” were, Jordon did not disclose their identities but said that there were local, regional and international interests in the properties. He related that one of those international interests was from the Middle East.
Some of them he said started to pull out while others decided to wait on the outcome the March 2, 2020 Regional and General Elections. Following the collapse of the coalition’s plan, Jordan reasoned that NICIL had to still meet payments to bond holders. As a temporary resort, he explained, NICIL decided to take monies from the proceeds of the bond to meet the payment schedule.
Recently the current Minister of Finance had told the National Assembly that a total of $5.125B has been repaid to bond holders. Jordan yesterday detailed that amount for the two payments that NICIL were forced to make out of the proceeds of the bond are included in that same amount.
The former Finance Minister went on to argue that even if it “seems like a mad thing to do” it is not a crime to do so and further contested that no money from the bond was lost because it was replaced.
Jordan revealed that NICIL was able to replace the bond with proceeds from “two other major transactions” that it was successful in. Questioned by this newspaper on what those successful transactions were, he responded that it was from the sale of some GuySuCo lands.
In an August 2020 article published by this paper, it was reported that NICIL through the Special Purpose Unit (SPU), had sold lands that were vested to it, and garnered deposits of $2.1 billion which were then used to offset outstanding repayment of a $30B bond secured by NICIL to retrofit and revitalise the three remaining sugar estates – Albion, Blairmont and Uitvlugt.
Kaieteur News also asked the former Finance Minister whether his government of the day had any alternative plan to repay the bond besides the sale of the of the four “non-profitable” estates. In response, he said that despite his government was confident that the sale of the assets would have been successful; NICIL had many other deals that were at the time awaiting approval from the cabinet and money would have been available to repay the bond.
In addition, Jordan noted the government was the guarantor of the bond and would have stepped in to meet payments. Ashni Singh had revealed to the House that government had to step in to meet and paid a total of $4.019B to date at an interest rate of 4.75%.
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