Coalition used $30B GuySuCo bond to repay lenders

Jun 23, 2021 News

Nation stuck with servicing high interest rate – Finance Minister

By Shervin Belgrave

Kaieteur News – Senior Minister within the Office of the President with responsibility for Finance, Dr. Ashni Singh, revealed during a recent sitting of the National Assembly, that the APNU+AFC Coalition was using proceeds from a syndicated bond for the Guyana Sugar Corporation Inc. (GuySuCo) to repay the same lenders that provided it.

Senior Minister with responsibility for Finance, Dr. Ashni Singh

Dr. Singh made this disclosure while he was being questioned about the bond by Coalition Member of Parliament (MP), Annette Ferguson. The bond was secured by State entity, the National Industrial and Commercial Investments Limited (NICIL), in March 2018 while the Coalition was in power.
It was announced back then by the ex-boss of NICIL, Colvin Heath-London, that the company was successful in securing a $30B (US$150M) syndicated bond to revitalise GuySuCo. Kaieteur News had reported that NICIL had used its assets as collateral to secure the amount from the lender.
During the 29th Sitting of the National Assembly which was held at the Arthur Chung Conference Centre, Liliendaal, East Coast Demerara (ECD), Ferguson sought to ascertain how much of the $30B bond was received by NICIL and how much has been repaid so far.
In response, Dr. Singh told the House that out of the full amount, NICIL had drawn down a total of $17.5B at a net trustee fee of $121M. He had also detailed that to date, a total of $5.125B has been repaid to the lender and noted, that when his Government entered office in August 2020, it had discovered an “astonishing situation” in terms of repaying the bond holders.
He said, “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 Minister pointed out too, that the bond was supported by an “unconditional Government guarantee,” which means that it will be required to “step into the borrower’s (NICIL) shoes, if needed.”
Singh told the House that such a circumstance did arise, and the Government was forced to make payments under the bond arrangement. According to him, his Government has paid a total of $4.019B to date.
Out of the amount repaid by his Government, Singh said that the principal was $3.41B while

the interest totalled $606M. He added too that in addition to this, payments of agency fees and trustee fees were made and had amounted to $1.75M each.
Singh had also revealed that the interest rate that NICIL had agreed to pay on the bond is 4.75%. It should be noted that when reporters had asked Heath-London, the former head of the entity, what was the interest rate agreed to, he had refused to disclose the information and had assured that the deal was a good one.
However, Singh told the House that it must note that the bond “was not raised through a competitive process as far as can be ascertained” and argued that the arrangement committed the Government to pay a 4.75% interest rate “at a time when its treasury bills would only have cost 1% or there about.”
The Minister with responsibility for Finance continued, that had the then Government raised the bond at 1% instead of 4.75%, “the cost savings that would have been incurred would have been around $2.1B.”
He continued, “That bond includes a clause that prevents or penalises early repayment of the instrument (bond) which effectively means, that we are stuck with this 4.75% interest rate that was committed to by the APNU+AFC while in Government.”
Singh upon request by the opposition had also divulged that at the end of 2020, a total of $11.471B was disbursed to GuySuCo. Out of that amount, $8.978B was related to current expenditure – meaning, that it was spent to keep the company’s operations running – while the remaining $1.293B was related to capital expenditure, meaning, that this amount was used to purchase assets for the company.
NICIL had disclosed in 2018 that the facilitator of the bond arrangement is the Republic Bank Limited (RBL) of Trinidad.

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