Republic Bank halts GuySuCo’s bond financing over misuse of funds

Sep 25, 2018 News

A commercial bank that played a critical role in negotiating a $30B (US$150M) bond facility to help finance capital works for the three-estate Guyana Sugar Corporation (GuySuCo) has halted any further disbursements.
The suspension is because of Republic Bank’s deep unhappiness with how the monies were used by GuySuCo.
On September 18, last, Managing Director of Republic Bank (Guy) Limited, Richard Sammy, wrote Maurice John, General Manager of the Hand-in-Hand Trust Corporation.
Hand-in-Hand had written to Republic Bank requesting that the purpose of the Trust Deed be changed regarding how the proceeds of the bond shall be applied.
The bond was supposed to pay for improvements of GuySuCo’s operations at the three remaining estates- Albion, Blairmont and Uitvlugt.
However, the cash-strapped GuySuCo reportedly used part of the bond proceeds to repay interest on another debt at a commercial bank.
The bond had strict rules how GuySuCo was supposed to collect and spend the monies.
According to Sammy, while Republic Bank has no objection in principle to the proposed changes to the Trust Deed, it remains “extremely disappointed” that proceeds from the bond was utilized for a purpose other than what was approved.
“The recitals of the Trust Deed referenced the exclusive purposes for which the net proceeds of the bond are to be used and this does not include repayment of financing cost and other debt servicing commitments to financial institutions,” Sammy wrote to Hand-in-Hand Trust.
Republic Bank said that in light of the report that proceeds from the bond were utilized to partially an or fully settle interest on an outstanding GuySuCo debt with another financial institution, it will be registering a formal complaint.
The bank also demanded a full explanation as to the apparent breach of the terms of the Trust Deed.
“Kindly note that the execution of the Trust Deed is being held in abeyance until the matter is satisfactorily addressed,” Sammy also announced.
Government is under pressure with GuySuCo barely expect to make 100,000 tonnes of sugar this year, after making more than a 200,000 tonnes in 2015.
In the last 18 months, the corporation closed four estates- including its newest one, Skeldon, Rose Hall, Enmore and Wales.
More than 7,000 workers have been sent home.
The David Granger administration had promised to privatize the four closed estates but the process had been dragging on with little word on progress from the Government.
There have been some serious offers, including from Saudi Arabia for the entire industry.
However, the administration has been largely quiet on its progress.
In the meantime, thousands of sugar workers made redundant are awaiting the other half of their severance.
Government had had to shave the budget of several ministries and state agencies to make the severance.
GuySuCo owed billions to the banks and suppliers with little end in sight for what has become a political football of an industry that once ruled the foreign exchange earnings for Guyana.
The administration had insisted that it can no longer allow GuySuCo to bleed the rest of the country with the billions it needed annually in cash bailouts.

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