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TCL on the brink

Cement producer facing shutdown (Part I)
Published: Monday, March 26, 2012

Anthony Wilson (/c ategory/byline-authors/anthony-wilson)

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As the strike at Trinidad Cement Ltd enters its fifth week, the Claxton Bay-based cement producer is being pushed closer and closer to the brink of financial collapse, which could throw thousands of workers on to the breadline, disrupt the countrys construction drive and an important part of its manufacturing sector and lead to tremors among the countrys financial institutions. The 12 per cent salary increase being demanded by the Oilfields Workers Trade Union (OWTU) to settle the strike would add Members of the Oilfields Workers Trade Union (OWTU) $21 million a year to TCLs current wage bill march outside the Claxton Bay headquarters of Trinidad of $170 million. Increasing the wage bill of Cement Ltd last week as the strike at the cement producer the Trinidad operations at this point would ended its third week. Photo: Rishi Ragoonath be a strange decision, some analysts argue, in the context of the fact that the groups shareholders have received no dividends since 2007 and TCLs bankers have received neither interest nor principal on the companys $1.8 billion debt in over 15 months. The proposed wage hike by the local union may lead to similar compensation demands at the companys Barbados and Jamaica plants and may cause TCLs bankers and bondholderswho literally are providing the company with life support nutrientsto pull the plug on the company, which began production in 1954. The TCL group, which has subsidiaries in Trinidad, Barbados, Jamaica, Guyana and Anguilla, is insolvent in that it determined sometime in the third quarter of 2010 that it would have been unable to pay its debts as they became due. In a notice to shareholders dated January 18 last year, the group announced that it was stopping the servicing of its debtboth the principal sums due and the interest on the principalbecause it did not have enough internal cash resources to pay both and carry on
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In its third-quarter financial report for 2011, which was issued last November 18, the groups non-current liabilitieswhich include its short-term and long-term debtswas put at $2.28 billion. TCL was forced to declare a moratorium on its debt payments because it was in default of its loan agreements. At the end of December 2010, TCL was required by its lenders to carry maximum short-term debt of US$45 million (TT$288 million) and to maintain a minimum current ratio of 1.2, which means that its current assets should have exceeded its current liabilities by at least 20 per cent. According to the groups 2010 audited financial accounts, TCLs short-term debt (bankers acceptances and overdrafts) amounted to $431 million, some US$67 million, or nearly 50 per cent higher than the debt agreements. The companys over-dependence on short-term debt has two direct consequences for its future survival. Firstly, according to the nine-month report for 2011: The absence of credit lines and the ability to establish letters of credit hindered continuous operations in Jamaica and Barbados in the nine months. And also when TCL finds a banker willing to lend it short-term money, the interest rate it is forced to accept is much higher than that paid by a financially sound company. TCLs Jamaican subsidiary, Caribbean Cement Co, was required to pay interest rates as high as 21 per cent, according to the groups 2010 financial report. TCL was also unable to maintain the minimum current ratio of 1.2. At end of 2010, TCLs current liabilities exceeded current assets by $1.36 billion and this had increased to $1.44 billion at the end of the third quarter of 2011. TCLs current liabilities increased sharply in 2010 because, according to the International Accounting Standards Rule 1 Presentation of financial statements, a company that is in default of its loan payments must classify all loan balances as current liabilities to reflect the fact that the loans are callable on demand as a result of the breach, according to the 2010 annual report. The fact that all of TCLs $1.8 billion debt is callable on demand, is crucial for TCLs ability to survive the downturn in the Caribbean economies as well as the five-week strike because it means that the companys productive capacity in Trinidad, Barbados and Jamaica can be forced to come grinding to a halt with no notice. TCL has been trying to renegotiate its debt with its lenders for more than a year now. The group had initially said that that restructuring exercise would be completed by the end of September last year. As of yesterday, there was no indication of final agreement between TCL and its lenders. Until the debt restructuring agreement is signed, the declaration of the moratorium on the TCL debt is an informal arrangement and not subject to any legal agreement. This means, according to the 2010 annual report, that TCLs lenders have retained their rights to demand immediate repayment of outstanding obligations in the amount of $1,704.7 million which the TCL Group is not in a position to immediately meet. Should lenders demand immediate repayment and initiate legal action to enforce their security there may be a risk to the going concern of the TCL Group. In other words, any one of the financial institutions that have lent the cement producer money can demand immediate and full repayment of their debt. If TCL fails to pay the lender in full and immediately, that lender can approach a High Court judge issue for remedies up to and including having TCL declared bankrupt. It is noteworthy that TCL has maintained in all of its public announcements on the debt restructuring that the majority of its lenders have formed themselves into a creditor committee. In its January 2011 statement, the group said that the creditor committee comprised large domestic and international institutional lenders representing 75 per cent of the TCL Groups total debt.

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representing 25 per cent of TCLs debtor about $325 millionare not part of the creditor committee and can take independent, legal action to shut down TCLeven if there is an agreement between the creditor committee and the company. Apart from being unable to pay its debts as they become due, the TCL group is also haemorrhaging money on a daily basis. TCL declared an after-tax loss of $80 million for the 2010 financial year. The 2010 loss will be exceeded in 2011 as the shortfall for the first nine months of last year amounted to $132 million. Also the group has agreed that it will add the $113 million in restructuring fees and other costs to its 2011 statement of earnings. Also worrying some independent analysts is TCLs delay in concluding the restructuring agreement, which envisages that all of the groups short and long term debt should be converted into an eight-year facility with quarterly principal payments recommencing in March next year and interest payments in December this year. The 2010 annual report says the restructuring would have been final by the end of September 2011. In October 2011, the restructuring was described as moving into its final approval and documentation stages. In November 2011, TCL anticipated that the agreement would have been signed in January as various approvals are being sought while the legal agreements to effect the re-profiling are being drafted. The fact the agreement was not signed before the February 27 onset of the strike means that TCL lenders would be quite unhappy if the management agreed to unsustainable wage increases for striking worker. And there are queries about the long-term sustainability of TCL even without the wage hike. Lenders question whether TCLs existing executive management can deliver the high value export markets in Haiti, the French Caribbean, Venezuela and Brazil and the production increases that the company is pinning its hopes on for a recovery. Either way, the cement producer is between the rock of its trade union and the hard place represented by its lenders and there are doubts about whether the company can survive the squeeze. See Part Two tomorrow: Why has TCL failed? News (/category/topic/news) Related Articles: Burning of TCL notices revealing (/letters/2012-03-08/burning-tcl-notices-revealing)

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Give Roget more bait & let the power fly more to his head~the longer the strike,the more likely CEMEX would take over & the current batch of workers would gain~
3 people liked this.

Oh well, looks like TCL might be done for. Isn't TCL's fault though; some people got greedy and would rather behave like hooligans instead of working to get paid and live. Roget is getting paid, he doesn't give a damn about anyone else, he just wants to incite more crap.
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Do Mr. Roget and his Comrade Cohorts in the OWTU read what is going on in the world around them?
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being rehired soon. This strike is useless when seen in the context of TCL's precarious financial position. Food for thought but apparently we are not thinking!
3 people liked this.

We need to have sympathy for the TCL workers, apparently the cement dust has gone to their brains and hardened causing cerebrial atrophy. As a result they are intelligence challenged.
4 people liked this.

High wages and benefits is the key towards destroying a company. High wages I mean management also. Please for the sake of Mother Trinbago, stop the bleeding and get back to work.
1 person liked this.

Due to poor management Tcl run without profit. i am a technician for a service company,we quote a service repair on an air compressor. a roller bearing for $1200.00 plus vat with Tcl engineers hoping they might refused the quote they approved the quote with a purchase order and next day the low class technician when to bearing centre and purchase a bearing for $80.00 and sold Tcl for $1200 what a high cost and knowing they company is losing .

The authority should put a muzzle on the mouths of the leaders of these Unions They should be shackled and made to understand the consequences of their unfaithful leading. If TCL should shut down - these so called leaders should resign. It seems as though they are only concerned about their own wellfare and about making a name for themselves and not for the welfare of the country at large and for the workers. This insensitive action of theirs could have galloping crippling effects on the construction industry in the country. The struggling middle and low class citizens would find it even more difficult to constuct homes etc. COME ON - LET GOOD SENSE PREVAIL.
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Eat little and live long. 5% better than 0 % OWTU has always been a selfish organization. The Government should force all Trade Unions to invest in their charges a minimum of 30%. See how they will run and hide.
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The Andy Bhajan led Board is the only Board TCL had that made a profit. They were the only Board to survive successive different Governments. Why get rid of the man and his team? Bring back Andy to take charge. It does not matter the Political preferences of a person so long as they are able to get the job done. Too much partisan politics in this little country. Too much tit for tat.
2 people liked this.

Scare tactics. This seems to be contradicted by the shiploads of cement arriving. Why not meet the workers demands 75% with an option of more as production improves? Only highly skilled workers can keep the system up and functioning. Pay them.

I also demand that they increase my pension by the 16.5%. If TCL workers cannot live on $11,000 per month, how do they expect me to live on $3,495?
3 people liked this.

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Without negotiations the employment relationship would be management imposing what they feel towards workers. This certainly has not been the case at TCL. Workers here enjoy salaries way above the national average and all their terms and conditions are way above when compared to others in the society who do similar type jobs. Greed is a bad thing and this strike would backfire on all of you.
5 people liked this.

If this is what Roget and co. wants, then the workers will accept the consequences whatever that may be, if TCL decides to fold because of a financial collapse, then the stupid and ignorant workers will feel the full brunt of what being on the breadline really meant, if that is what they want that is what they will get, contentment in life is when u are satisfied with what u have and not being greedy......
7 people liked this.

may i humbly suggest-----offer to sell the TCL operations to the OWTU and see if they will be anxious to undertake such a profitable enterprise and pay their employees the wages and benefits(and more) they are demanding.....after all roget and company are a capable bunch.
10 people liked this.

Finally a report that shows the true financial picture of TCL. The OWTU does not care about TCL and it's operation, all they care about is "mo money". At a time when the company cannot afford such ridiculously high demands. Where is the common sense OWTU in three years (if the company survive) you will be back at the bargaining table demanding "mo money". You all are nothing but thieves and robbers. Let good sense prevail.
7 people liked this.

How can TCL incur a debt of 1.8 billion? Even losing every year....for how long? Where did this money go?
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7 people liked this.

I firmly believe that TCL is better of in competent hands, not the present executive. Bertrand and his looters should do the decent thing and just pack up and leave, they sucked on this company too long, these vampires.
4 people liked this.

I am TIRED of SAYING; "JAIL THE SONAFAHBITCH" for INCITING the POPULATION of the WORK-FORCE, that's being UNDER THE CONTROL of O.W.T.U. ROGET'S INTENTION is to DESTROY, and not BUILD. This "THUG" ROGET with his COMMUNISTIC, and REVOLUTIONARY CONDUCT, that is being CONDONED by his COMRADES, namely McLEOD, and ABDULLAH, should be made an EXAMPLE OF, and place BEHIND BARS (JAIL) for a LONG, LONG PERIOD of TIME.... DESTRUCTIVE S.O.A.B!
12 people liked this.

And if the collapse is genuinely approaching, then the workers will be out of a job, known to all potential employers as a part of the rabble that brought TCL to its knees and therefore not someone they'll want to employ themselves. The country as a whole will suffer...but rest assured... Roget will still have his $100,000 pm salary. Doesn't that make you feel good?
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