Rights for TCL shareholders

Shareholders in Trinidad Cement will be offered additional shares in the company by way of a rights Issue of 124,882,568 new shares, to be priced at TT$2.90 per share. Shareholders will be offered the right to purchase one new share for every two shares held. The stock last traded at $2.70 on Thursday on the Trinidad Stock exchange. The issue if fully taken up will raise $362,159,447 for the company.
The issue will be underwritten by up to US$45 million by Sierra Trading an affiliate of Cemex SAB to ensure that the minimum funding targeted of US50 is met. In order to have the underwriting of that magnitude the company needed to and got permission of shares at an extraordinary meeting to lift a 20 percent shareholding limitation, in case the shareholders did not subscribed to enough of the rights they are entitled to.
Sierra Trading will take up the rights due them on their 20 percent ownership of the group. The agreement stipulates that if after the rights issue the underwriting company does not get up to 35 percent of the shares of TCL then there will be a private placement of TCL shares to bring the holdings to 35 percent of TCL issued shares.

Carib Cement One of the groups subsidiaries

For the nine months to September, profit for the group’s shareholders amounted to $60 million versus $69 million in 2013. The 2014 figures reflect cost of nearly $29 million associated with an attempt at restructuring the heavy debt the company has, but the 2013 results benefited from a tax credit of $27 million.
TCL is loaded down with debt at relatively high interest rates. The debt at the end of 2013 was just under TT$2 billion all of which has been switched to current liabilities as a result of the default occasioned by the decision of the company to suspend payment on the debt pending negotiation of the terms. Equity stood at TT$570 million at the end of September, well below the debt. All amounts are in TT dollars. If the fresh capital is raised equity will reach around $1 billion and loans should decline to around $1.3 billion by the end of 2015 or close to a one for one relationship between debt and equity. The improved capital profile of the company should allow them to finance the remaining debt at a more advantageous cost than currently.
The rights is not badly priced as the stock an IC Insider BUY RATED seal of approval is severely undervalued on the TTSE. Investors will of course take into consideration negative economic development in Trinidad its main market with the fall in oil prices world wide an its impact on revenues for the country.