PUP trying to cause Sugar Industry Collapse?

There is an intense debate taking place with the investment proposal being offered by Banco Atlantida from Honduras in trying to secure majority ownership in Belize Sugar Industries Ltd (BSI). The background to this scenario is that in 2007 BSI secured a wide portfolio of financing for the upgrade of the Sugar Factory and for the construction of Belize Co-generation Ltd (Belcogen) to the tune of approximately BZ $130 million.

This single largest investment in Belize was apparently hinged on the premise that sugar production would improve each year thereafter to exceed 125,000 tons, and cane harvesting would reach 1.4 million tons by 2010, when Belcogen was to come on stream.

To the disappointment of all in the Industry and the detriment of BSI, sugar production has failed to surpass even the 100,000 ton mark for the past five consecutive years, due to a significant decrease in cane production and quality. This has resulted in a call from two of the development banks involved in the BSI investment, ING and FCIB, demanding full re-payment of BZ $60 million by September 30th of 2011. This call does not include the loans to the Belcogen financiers.

Now the PUP is trying to instigate a fray by demanding that the Government of Belize identify this huge amount of money to allow the Cane Farmers to own and operate BSIL. They are trying to get all stakeholders to demonstrate against the government to force it to do as they, the PUP, suggest. But effectively the only ones who can decide the fate of the sugar company are the BSI employees, who in 1994 became the official beneficiaries of the Trust called BSI Employee Holdings (BEH), which owns 81.29% of BSIL. The other shareholders are Booker Tate Ltd, 10% and GOB, 8.71%.

To facilitate cane farmer ownership of BSIL, GOB would have to offer a sovereign guarantee of BZ$150 million ($130M to repay loans and $20M operating capital). In this economic atmosphere, no government would expose taxpayers to that level of indebtedness. Plus what assurance would there be that sugarcane production would suddenly improve, without additional investment, to allow for manufacturing profits? Any investor who cared to look at the recent history of cane production to weigh the risks involved would surely not be impressed. Atlantida recognizes this main deficiency in the Sugar Industry and their proposal addresses this deficit.

These new investors have submitted a written proposal to invest USD$90 Million in the sugar industry. A portion of these monies will be directed at BSIL’s loan repayment (USD $20M), some on Factory expansion (USD $25M), some on BSI’s cane growing project (USD$25M) and the final USD$20 million will be on-lent to existing cane farmers to improve on their own cane production. There is a position for all stakeholders in the investment proposal, which comes at no risk to taxpayers. An important point which must be mentioned is that, contrary to what the PUP press release is saying, none of the shares held under the Employees BEH Trust will be sold, only that the Trust will become a minority shareholder.

The BEH beneficiaries of the Trust have indicated that they will support the investment if a written commitment is given by BSI and GOB that their outstanding dividends owed to them by BSIL are paid. Dividends had been declared in the profit-making years of 2006, 2007 and 2009, but no actual distribution was made since the former financiers had instituted a dividend restriction policy, to be lifted after a major portion of the loans have been satisfied. Note that this arrangement was established during the PUP’s second term of government.

To hear the PUP now declare in a press release that “the PUP Northern Caucus remains in solidarity with the owners of the majority shares in BSI, the more than 400 workers who are owed approximately five million dollars ($5m) in unpaid dividends" reeks of duplicity, and makes one wonder who they are trying to hoodwink. It was as if the PUP intentionally wants to scare away Banco Atlantida and cause the sugar industry to collapse for political gain. If that happens, BSI collapses and they win the next election, what will they inherit?

source: guardian