Business
Wednesday, August 21, 2013ALMOST all bondholders of US$162 million ($16.5 billion) in Clarendon Alumina Production (CAP) Notes have accepted an offer to exchange the debt for Government of Jamaica securities.The state-owned company, which owns a 45 per cent stake in Jamalco, said that 99.85 per cent of the outstanding principal amount of the CAP Notes were tendered in a one-to-one debt exchange last Friday.Holders of the remaining bonds, carrying a value of approximately US$240,000, have until August 28 to accept the offer, but they will just get 98 per cent of their principal. And if they decide not to participate at all, they will see their debt being subordinated to a forward sales agreement with Hong-Kong based Noble Resources.In the event of CAP’s bankruptcy or liquidation, Noble would be entitled to be repaid in full before the Jamalco Co-tenancy Assets would be available to satisfy its obligations on the CAP Notes.The exchange offer and consent solicitation, for which consents have been delivered, was also a condition of the sales arrangement with the Hong Kong-based company, for which CAP already received US$75 million of a US$120 million for the supply of between 3.4 million and 6.1 million tons of alumina over the next 12 years.“Pursuant to (the agreement) CAP will provide and perfect a security interest for the benefit of Noble over the approximately 45 per cent interest it holds as a co-tenant in common in the assets of Jamalco, a joint venture with Alcoa Minerals of Jamaica, an indirect subsidiary of Alcoa Inc,” said a press statement issued by CAP. “This security interest will be granted upon the successful completion of the exchange offer and consent solicitation.”The new debt to Noble will be offset against alumina sales, while the Hong Kong-based firm has the option to purchase all or part of CAP’s interest in Jamalco, at market price up to 2025.In any case, shifting the debt obligation from CAP to the Government, including making amendments to the Fiscal Agency Agreement, which would keep Jamaica as the guarantor of CAP Notes, gives the Government the flexibility to divest its stake in the company without “triggering the change of control provision or the negative pledge provision”.Clarendon Alumina has been in a loss-making position for years, having accumulated a US$250 million deficit and long-term debt of US$447 million up to March 31, 2013.The company also expects to lose another US$19 million this financial year, which ends next March, but the removal of the CAP Notes from its balance sheet and the reduction of debt owed to Jamalco would put the state agency in a positive equity position.Jamalco alumina refinery in Clarendon.
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CAP gets near 100 per cent participation in debt exchange
