BSI CEO Joey Montalvo thanks Prime Minister Dean Barrow (extreme right) for extending the term of the $10 million loan.
The Government of Belize has agreed to give The Belize Sugar Industry Limited (BSI) a one-year grace period before the company has to begin repaying the $10 million loan that it made to get the crop started last December.
To this end, Prime Minister Dean Barrow and Deputy Prime Minister Hon. Gaspar Vega met with BSI Chief Executive, Officer; Belize Sugar Industry Control Board Chairman, Hugo Patt; and Belize Cane Farmers Association’s President, Alfredo Ortega, to sign an agreement extending the term of the loan.
The agreement was signed at the Coastal Zone Management Authority Building in Belize City on Wednesday, September 28.
BSI has also been granted a one-year extension on its US$20 million loan from the International Netherlands Group (ING) which was due on September 30, 2011, but this was contingent on the government holding off on collecting its $10 million.
ING’s concession is also contingent on the cane farmers maintaining the cane quality and planned delivery schedule that was achieved this past crop, which in terms of the tonnes of cane to tonnes of sugar (TCTS) ratio of 8.5 was one of the best on record.
At the moment BSI still does not have the money to repay ING’s $20 million loan, which becomes due on September 2012, but the company now has a year in which to find a strategic investor who can infuse the company with the required capital to expand the factory to handle the increased sugar cane production, which the Belize Sugar Cane Farmers Association has promised to deliver..
The long term target is to grind 1.5 million tones of cane per year, and if the T.C.T.S. ratio of 8.5 achieved this year can be maintained, that would mean BSI would be producing some 176,470 tonnes of sugar per year.
At present the best offer on the table is the $90 million proposal from Banco Atlantida of Honduras, but the B.S.C.F.A. has thrown its hat into the ring by announcing on August 29 that it is seeking financing to buy a controlling interest in B.S.I., or at least to present a viable alternative to selling a controlling interest to the Atlantida group, so that ownership of the industry remains in Belizean hands.
For its part B.S.C.F.A. President Alfredo Ortega said the farmers have already invested $1 million in a sugar cane replanting program and another $3 million in financing has been made available to cane farmers from the Development Finance Corporation to help them improve their cane fields.
The farmers have also received some $2 million worth of fertilizer from the Association through the European Union’s Fair Trade incentive program, to be applied to their cane fields to help improve production for the upcoming crop.
BSI also owes US$10 million to the First Caribbean Investment Bank. The Banco Atlantida proposal had promised not only US$20 million to pay off the ING debt, but another US$20 million for expansion of the factory, US$25 million to buy some 20,000 acres of land for the company to plant more cane, US$20 million to be made available in soft loans at favorable terms to cane farmers and US$5 million to take care of operation start-up costs for the upcoming crop.
If the deal were to go through, the Atlantida Group would acquire at least a 51% controlling interest in BSI through the issuing of new shares, which would mean the dilution of the 81.29% shares presently owned by the BSI Employees Holdings Trust.
As part of their due diligence, the Atlantida group representatives have already met with representatives of the Belize Sugar Workers Union, who are the beneficiaries of the trust. The union representatives conceded that a smaller share of a bigger pie was better than a large share of no pie; as this is what would happen if the ING bank were to foreclose on BSI.
The union also had concerns about ensuring the long-term job security for all employees; the long term prosperity of the entire sugar industry and the further expansion of the industry.
They received assurances from the Atlantida Group that the workers’ jobs would be secure. The Atlantida proposal also took into account the payment of outstanding dividends to the BEH group
The bank also agreed to allow the ratio of 65% to farmers – 35% to BSI for splitting the profits after all the sugar is sold at the end of the crop to remain as the system of payment to farmers.