Jamaica's Caribbean Cement Company Limited is planning a debt swap with its parent, Trinidad Cement Limited (TCL), that would free the company of US$15 million (J$1.34 billion) of liabilities.

The company proposes to convert the debt to preference shares that would not attract a fixed dividend, but would be treated as equity in the Jamaican operation, whose installed capacity has been increased from one million to 1.8 million tonnes.

Caribbean Cement's big debt to TCL was generated during the modernisation and upgrading project, which was finalised in August 2009.

To follow through on the debt conversion, the company needs shareholders to sign off on the deal.

New class of shares

Executives of Caribbean Cement were said to be in a meeting when Wednesday Business sought comment, and Chairman Brian Young was out of the country, but an information notice on the stock exchange confirmed that the company planned to issue the new class of shares.

"The preference shares are expected to be treated as equity securities as they do not carry rights to a fixed dividend," said Caribbean Cement's market notice.

"TCL will only be entitled to receive a dividend as and when one is declared in respect of the ordinary stock units of CCC, of at least the same amount."

How much the swap would grow TCL's ownership or dilute the value of existing shares was unclear.

The Trinidad group already owns 74 per cent of Caribbean Cement; while minority partners like Cemex of Mexico, through Scancem International St Lucia Limited, Mayberry Investments, National Insurance Fund, Guardian Life Limited are among the top six shareholders of the listed cement producer.

Caribbean Cement has set an extraordinary meeting for January 5 at Knutsford Court hotel in New Kingston for shareholders to vote their acceptance of the proposal.

The Jamaican operation, whose Rockfort plant was upgraded at a cost of US$177 million, had $5.25 billion in liabilities at September 2009, of which $2.34 billion was long-term debt.

The swap would erase 25.5 per cent of the total debt and 57 per cent of the long-term liabilities.

business@gleanerjm.com