Following discussions with President David Granger yesterday about the state of the Guyana Sugar Corporation (GuySuCo), the Ministry of Finance (MoF) last evening said that it could not assist the Corporation with a financial bailout as it did not have the funds to do so.
“The Ministry of Finance notes GuySuCo’s request to the Government for a bailout, and wishes to assure that it is actively seeking to assist GuySuCo to access funds that are available to it, to mitigate its present challenges. Notwithstanding however, the prevailing national circumstances, coupled with the challenges of COVID-19 and a reduced national income, render the Treasury incapable of providing a bailout to GuySuCo,” the ministry said in a statement last evening.
The Ministry of Finance’s statement came a day after GuySuCo said that its future hinges on a government bailout as the corporation faces possible closure, having exhausted its finances.
In March of 2018, through local financing arranged by Republic Bank Limited, government holding company NICIL managed to successfully negotiate a Bond Facility for $30 billion.
The MoF yesterday said that over $9 billion has been used from the bond, much of it outside of the borrowing terms of agreement and the money it got from selling lands owned by the estate has been used to pay the interest on the loan.
“We wish to remind that a $30 Billion bond backed by NICIL’s assets and guaranteed by the Government of Guyana was secured through NICIL to retrofit and revitalize the 3 remaining sugar estates. During the period July 2018 to February 2020, $9,720,759,568 was disbursed to GuySuCo to fund its Capital and Operational Expenditure – much of which was outside the terms of the bond,” the statement said.
“Additionally, NICIL through the SPU, sold lands that were vested to it, and garnered deposits of $2.1 billion. The full sum was used to offset bond payments that became due in May, 2020. The balance of $1.5 billion for the lands will be paid over to NICIL when the vesting orders are signed and gazetted. It is expected that part of this sum will go towards a bond repayment which is due on July 4th, 2020, and the remainder to GuySuCo. GuySuCo also generates its own income,” it added.
With another disbursement expected in the coming days, according to MoF, it “urge that NICIL, GuySuCo and the syndicated lenders work assiduously to resolve any bottlenecks.”
Since the loan agreement was reached, GuySuCo has bemoaned that it was not given the funds according to a planned resuscitation programme and that it seemed that they had to “beg NICIL” for its own money.
The current de facto government said that it “remains committed to making GuySuCo a viable partner.”
It was the Guyana Agricultural and General Workers Union (GAWU), which on Tuesday informed that Chairman of the Board of Directors, John Dow had written to the president seeking an urgent bailout to alleviate the crisis the corporation is in.
The union said that in a letter dated May 15, Dow appealed to President David Granger “… to use your good offices to arrange for funding to prevent the impending closure of the Industry.” In the letter he also said that GuySuCo needs funds now to be able to survive after the second week of June 2020.
According to the letter seen by this newspaper, the chairman of the board detailed the “dire” situation of the industry to President Granger.
“Our Finance Department estimates that the Corporation is expected to be out of cash by the 2nd week in June and until then we can only afford to meet labour, fuel and cane farmers’ payments and the bare essentials (labour transport, lubricants etc),” he highlighted, before stating that cash will not be available to meet “any outgoings for spares and
materials for the mid-year Out-of-Crop maintenance of our factories.”
“This inability to purchase spares and materials is likely to result in factory performance in the 2nd Crop 2020 being adversely affected with increased factory downtime, reduced sucrose extraction at the milling plant and lower sugar and molasses production,” Dow informed the President in a letter he says he was mandated to pen as a result of a decision taken at a statutory board of directors meeting.
With a backlog of $2.1 billion owed to creditors, Dow said creditors are unlikely continue to grant further credit.
“Our inability to pay creditors in time has resulted in many of our most experienced contractors being unwilling to tender for GuySuCo projects, and creditors have been demanding large up-front payments before supplying goods,” Dow explained.
GuySuCo’s current financial straits mirrors the situation the corporation had found itself in when the APNU+AFC government took office in May, 2015.
Within the past months, this newspaper had reported that the company has found itself in a financial crisis and was uncertain how it would meet its payroll requirement.
A source said that the current financial crisis also prevents the corporation from accessing loans from financial institutions as the four estates which were closed under Granger’s administration remain a liability to the corporation.
According to the source, the corporation’s potential to access these funds is severely hindered as these estates’ liabilities remain on their books while Government’s holding company National Industrial and Commercial Investments Limited’s (NICIL) Special Purpose Unit (SPU), has absorbed their assets.
