Caribbean Cement Company signed a memorandum of understanding on March 16 with its parent company, Trinidad Cement Ltd., agreeing to terminate an operating lease agreement for its plant in Kingston, Jamaica, reported The Gleaner.
The company could reduce its associated costs by more than a third or about $10 million annually when it exits the lease agreement, estimates the Financial Gleaner.
As part of a three-pronged deal, Caribbean Cement will buy back its assets from Trinidad Cement. The company will acquire $118 million worth of assets on its books. The deal also involves the redemption of an aggregate number of 52 million preference shares issued by Caribbean Cement to Trinidad Cement in 2010 and 2013 for about $40.5 million to be paid over a nine-year period starting in 2018. Such funds will be sourced from at least one-third of the company’s profits available for distribution from the previous year.
The financing options to fund the asset acquisition and the redemption are yet to be disclosed.
"This arrangement is a remarkable milestone for Carib Cement in the context of creating a stronger and more transparent balance sheet. It has been one of management's top priorities since the company's last annual general meeting at which shareholders were given the commitment that the best structure would be identified to acquire ownership of the assets," according to Caribbean Cement General Manager Peter Donkersloot Ponce.
A special advisory group, including representation from Caribbean Cement minority shareholders, was subsequently put in place for that purpose, added Donkersloot.
The definitive agreements in relation to the transactions are expected to be executed by Caribbean Cement and Trinidad Cement within 90 days from the date of signing.