Guyana Sugar Corporation (GuySuCo) executives say they are yet to see the terms of the $30 billion bond secured for the corporation and said the proposed approach to utilise the money will not enable the corporation to achieve the goals and objectives in its Strategic Plan.
Last week, in a statement, the National Industrial and Commercial Investments Limited (NICIL) said that GuySuCo has breached the conditions of the $30 billion bond acquired for the industry by spending on rehabilitation works and placed the entire facility at risk when they used the funds for purposes for which they were not intended.
NICIL had issued the statement following an article in the Stabroek News which reported the sugar corporation’s executives’ belief that Colvin Heath-London, the Head of NICIL’s Special Purpose Unit (SPU), who is also acting Chief Executive Officer of NICIL, is stymieing their work.
However, GuySuCo’s management say the corporation has been left in the dark regarding the terms of the $30 billion secured for it. Speaking on the condition of anonymity were executives and managers of the entity who said that they have remained silent for too long at the cost of development of the corporation.
The officials said that blame for the problems GuySuCo is experiencing with the holders of the $30 billion bond should be laid on the SPU. They argued that instead of involving the corporation, the SPU overreached its mandate and to get the money, copied sections of the sugar industry’s resuscitation plan but left out key elements. They also did not inform the corporation of the terms of the bond.
“Where the process got derailed was after the SPU took GuySuCo’s ‘Three Year Plan 2018-2020’ and negotiated the $30 billion bond, as a means of providing interim financing,” a senior executive of GuySuCo told Stabroek News.
“The SPU extracted elements from the GuySuCo plan in its effort to make the proposal to acquire the G$30 billion bond attractive to the bank and the shareholders; their proposal essentially focused on co-generation and (production of) plantation white (sugar) without consideration of the rehabilitation works which needed to be done in order to support such ventures. They essentially brought forward these projects without considering the necessary rehabilitation of fields, infrastructure, factories, etcetera, which are required for these projects to be viable,” the executive added.
This position was echoed by one of the corporation’s managers who explained GuySuCo’s “fundamental problem” with the bond arrangement and release of monies.
“The corporation had laid out in its plan for recapitalising the cultivations in order to improve cane yields, as well as factories, as a first step towards the value added projects, such as co-generation and plantation white, since in order for co-generation and plantation white to be produced, there needs to be sufficient quantity and quality of the raw material as well as appropriate infrastructure. Had NICIL/SPU negotiated the bond based on GuySuCo’s proposed process for implementing the plan, NICIL/SPU would not have the challenge they are having now with the bondholders,” the manager said.
In its statement, NICIL had said that the bond was obtained for the specific purpose of recapitalising GuySuCo and bringing it back to profitability. “However, GuySuCo instead wants to use the funds for rehabilitation works, which is the same strategy they adopted when they were receiving subvention from the government,” it added.
According to NICIL, the misuse of funds prompted Republic Bank Limited (Republic), in its capacity as arranger for the NICIL/Government of Guyana Guaranteed Bond, to write NICIL requesting an update on behalf of all bondholders. In the letter, according to NICIL, Republic said that bondholders were learning, through the print media, of GuySuCo’s misuse of the funds.
NICIL said that Republic later pointed out to it that GuySuCo’s actions were in direct conflict with the conditions of the Trust Deed. Further, NICIL said the actions of GuySuCo that violated the terms of the Trust Deed, also prompted the Guyana Bank for Trade and Industry to register discontent over the decisions made by the management.
‘Key Challenge’
But GuySuCo’s management said that for NICIL to say that the corporation violated the terms of the bond is disappointing and disingenuous as GuySuCo’s CEO, Harold Davis Jr, had written to NICIL informing the agency that GuySuCo’s Board will be responsible for “prioritisation for expenditure”.
“The article further stated that Dr Davis proposed his own structure for accountability which was outside of the existing structure for the bond facility. A key challenge for NICIL is that the premise upon which the bond was negotiated and the terms of the bond facility is contrary to the process outlined in GuySuCo’s plan. It is important to note that GuySuCo has not seen to date the bond facility document; sometime late 2018, the corporation was provided with a copy of the ‘Trust Deed’,” one executive explained.
The executive said that Davis essentially outlined to NICIL and SPU in the February 15, 2019 correspondence referred to by NICIL, “What is required in accordance with the policies, procedures and guidelines of GuySuCo and the laws of Guyana.”
It was pointed out that the Chief Executive of GuySuCo has a responsibility to ensure that all transactions relative to the corporation conform to established principles, hence he sought to express the limitations and boundaries within which the corporation has to operate in the letter he sent to NICIL and SPU.
“Firstly, it is important to establish clearly that the Special Purpose Unit was established as a special purpose vehicle through which the assets for GuySuCo’s four estates – Skeldon, Rose Hall, East Demerara (Enmore) and Wales would be divested and the proceeds of the sales injected into GuySuCo. The decision was taken by the Government that NICIL will host this vehicle which is the SPU. Another point that must be very clear is that the sole purpose of the SPU was to divest GuySuCo’s assets; including the four estates and some lands for commercial sale. The funds are to be used for rehabilitation/recapitalisation of the new commercial projects. Therefore, the common interest between GuySuCo and NICIL/SPU is relative to the four vested estates,” an executive said.
“However, NICIL/SPU took a decision to secure the G$30 billion bond facility as an interim financing arrangement subject to the divestment of the four estates. This decision was entirely a decision of NICIL/SPU without any consultation with GuySuCo. The point made by NICIL in the response to Stabroek News that ‘the real source of the tension between NICIL and GuySuCo …is the deeply rooted philosophical difference between the two agencies with regard to the structural changes and strategic direction for the industry’, GuySuCo would like to state clearly that there cannot be any philosophical difference with NICIL since the agency’s role is clear,” the executive stressed.
“GuySuCo had established two task forces to conduct separate analysis and develop a self-sustaining plan on the way forward for the industry which included value added ventures, also to determine what to do with the assets. The premise on which this was done was the Commission of Inquiry report, the ‘State Paper on the Future of the Sugar Industry’, and the objectives of the government for the reorganisation of the industry and GuySuCo,” the executive related.
“One task force focused on the ‘Diversification Options for the Sugar Corporation Inc.’ while the other focused on a detailed ‘Three Year Plan 2018 – 2020’ for Albion, Blairmont and Uitvlugt. The task force that focused on the three-year plan was chaired by the current Chairman of GuySuCo’s Board of Directors, John Dow. The main objective of the Sugar Task Force was the refurbishment of Albion/Port Mourant, Blairmont and Uitvlugt Estates and they included the following: ‘Determining the Capital and Routine Expenditure required for the 3-year period 2017 to 2020 with a view of securing production at these locations, cost rationalisation/cost reduction, and organisation structure and human resource review’. The reports which made up the plan focused on: ‘Agriculture; Factories; Human Resources and Industrial Relations and Finance and Marketing’,” the executive added.
“Overreach”
And with regard to NICIL claiming that GuySuCo has not been complying with requests for providing financial documents regarding the monies spent, one manager said that it was a violation of the corporation as it is not legally bound to answer to NICIL.
“This is an intrusion into the corporation’s business and overreach by NICIL/SPU. Again, GuySuCo would like to make it very clear that it falls under the Companies Act which specifies the legal and other obligations of the company relative to its financial and other reporting, and every year, its accounts are audited. However, the corporation has informed NICIL/SPU that whenever it becomes necessary, an auditor from NICIL/SPU is invited to peruse GuySuCo’s financial records. Additionally, the Corporation is governed by a Board of Directors to whom the Chief Executive, management and the organisation are answerable,” the official posited.
Another important point, the official said, is the fact that GuySuCo has an established tender process in keeping with the Procurement Act and external auditors, among other scrutineers, who have not had any difficulty with the process, “yet NICIL/SPU has an interest in the corporation bypassing this established credible process.”
The managers all agreed that NICIL/SPU has “plagiarised GuySuCo’s Strategic Plan without following the practical steps outlined therein or consulting with the designers of the plan” despite that fact that NICIL’s proposed approach will not enable GuySuCo to achieve the goals and objectives in the Strategic Plan.
