An­tho­ny Wil­son

Tues­day's land­mark spe­cial (com­pul­so­ry) meet­ing of share­hold­ers of Trinidad Ce­ment Ltd (TCL), at the Radis­son Ho­tel in Portof- Spain, sig­nalled the end of the bat­tle for con­trol of the ce­ment pro­duc­er that be­gan in May 2013 with Wil­fred Es­pinet, who cur­rent­ly runs his own busi­ness­es but was once an ex­ec­u­tive di­rec­tor with­in the As­so­ci­at­ed Brands em­pire.

Es­pinet was elect­ed as the first chair­man of the new TCL board at a meet­ing at the Radis­son that fol­lowed short­ly af­ter the spe­cial (com­pul­so­ry) meet­ing, in which re­tired per­ma­nent sec­re­tary Al­i­son Lewis, Chris Dehring, Glenn Hamel-Smith, Nigel Ed­wards, and Ce­mex ex­ec­u­tives Car­los Palero and Fran­cis­co Aguil­era were al­so elect­ed.

Es­pinet was the main in­sti­ga­tor of the move by share­hold­ers rep­re­sent­ing 5.68 per cent of TCL's is­sued share cap­i­tal to bring an in­junc­tion to stop the com­pa­ny's an­nu­al meet­ing in Ju­ly 2013.

That in­junc­tion was brought be­cause TCL–then un­der the con­trol of Andy Bha­jan, its chair­man, and Rollin Bertrand, its CEO–re­fused a pro­pos­al from the group of 11 share­hold­ers, that in­clud­ed Es­pinet, Ka­mal Ali, Is­sa Nicholas, He­len Bhag­wans­ingh, Tatil Life As­sur­ance Ltd and a Bar­ba­di­an en­ti­ty named Bourne In­vest­ment Inc, to ac­cept five nom­i­nees on the man­age­ment proxy cir­cu­lar to serve as di­rec­tors. The five orig­i­nal­ly pro­posed to serve as TCL di­rec­tors were: Garth Cha­toor, Emile Elias, Im­ti­az Ra­haman, Gre­go­ry Thomp­son and Kelvin Mootoo.

In the af­fi­davit ac­com­pa­ny­ing the case brought by the 5.68 per cent TCL share­hold­ers in Ju­ly 2013, Es­pinet stat­ed: "I have not­ed with much con­cern over the past four or five years, the fact that TCL has been strug­gling fi­nan­cial­ly so much so that:

�2 The di­rec­tors have not de­clared a div­i­dend for the years end­ed 2008 to 2012 �2 TCL has had to en­gage in ma­jor debt re­struc­tur­ing as a re­sult of it be­ing un­able to prop­er­ly ser­vice its debts of ap­prox­i­mate­ly $2 bil­lion �2 The share price of TCL has dropped from $10.25 a share in the fourth week of June 2008 to $1.05 a share as at Ju­ly 10, 2013. This means that a share­hold­er who held an in­vest­ment in TCL through shares, would have seen his in­vest­ment de­cline by 90 per cent from June 2008 to date and he would not have had any div­i­dends paid to him dur­ing this time ei­ther."

Es­pinet, in the af­fi­davit, said, as a re­sult of his con­cerns about the per­for­mance of TCL, he spoke with a num­ber of peo­ple, in­clud­ing his "per­son­al friend" Ian De Souza, the CEO of Re­pub­lic Bank Bar­ba­dos. Ac­cord­ing to the Es­pinet doc­u­ment, he was told that Re­pub­lic Bank, which held TCL shares through its pen­sion plans, was al­so con­cerned about the ce­ment pro­duc­er's per­for­mance from a share­hold­er's stand­point.

There are sev­er­al in­ter­est­ing points to note about this in­ter­ven­tion by Es­pinet and De Souza, who were able to mo­bilise some oth­er TCL share­hold­ers. First­ly, this was a group that was dis­sat­is­fied with the per­for­mance of TCL and their re­turn on their in­vest­ment in the com­pa­ny.

Sec­ond­ly, the orig­i­nal group brought to­geth­er Re­pub­lic Bank with a dis­parate group of in­di­vid­u­als and com­pa­nies of sig­nif­i­cant fi­nan­cial means, who each held fair­ly large in­di­vid­ual stakes in TCL. In oth­er words, as in­vestors, this group of share­hold­ers would have suf­fered loss­es as a re­sult of the sub­op­ti­mal per­for­mance of the shares of the ce­ment pro­duc­er, which re­flect­ed its sales and prof­its, since 2008.

To be fair to the for­mer di­rec­tors of TCL, much of the com­pa­ny's per­for­mance be­tween 2008 and 2012 can be at­trib­uted to the sharp de­cline in con­struc­tion through­out the Caribbean as a re­sult of the glob­al fi­nan­cial cri­sis but al­so be­cause TCL's up­grade of its Ja­maica op­er­a­tions was over bud­get and late.

The up­grade was orig­i­nal­ly fund­ed with US$105 mil­lion in fi­nanc­ing that was struc­tured and arranged by the In­ter­na­tion­al Fi­nance Cor­po­ra­tion (IFC), the pri­vate-sec­tor arm of the World Bank Group. A ma­jor com­po­nent of the IFC's fi­nanc­ing came from Re­pub­lic Bank, which pro­vid­ed TCL with a US$20 mil­lion loan and a US$50 mil­lion equiv­a­lent bond is­sue in T&T dol­lars.

This means, third­ly, that Fin­cor (Re­pub­lic Fi­nance and Mer­chant Bank Ltd) pro­vid­ed 66.6 per cent of the orig­i­nal fi­nanc­ing for TCL's up­grade, which means not on­ly was the bank a trustee of TCL shares through its pen­sion plans, but it was al­so one of the ce­ment com­pa­ny's largest cred­i­tors.

The fourth point about the cor­po­rate over­throw at TCL is that this was an his­toric vic­to­ry for share­hold­er democ­ra­cy, as the vote in favour of the elec­tion of the sev­en new di­rec­tors un­til the con­clu­sion of the next an­nu­al meet­ing of TCL was ap­proved by 83.33 per cent of TCL's to­tal shares.

I think the rea­son the Bha­jan/Bertrand board was forced out was be­cause the TCL share­hold­ers, in their col­lec­tive wis­dom, prob­a­bly thought that they would pre­fer that the com­pa­ny be run by peo­ple who were not fight­ing its stake­hold­ers– in­clud­ing its share­hold­ers; its trade union (wage in­creas­es and back pay); its cred­i­tors (snide re­marks about usu­ri­ous in­ter­est rates); and its cus­tomers (nine per cent wage hike in ce­ment prices).

The rea­son that the vote in favour of new di­rec­tors was so high was be­cause there was an al­liance of share­hold­ers who want­ed the Bha­jan/ Bertrand board out. This al­liance would have in­clud­ed the Oil­fields Work­ers' Trade Union, large lo­cal in­sti­tu­tion­al in­vestors (such as NIB and UTC), the largest sin­gle share­hold­er (Ce­mex) and large in­di­vid­ual share­hold­ers.

But what do these TCL share­hold­ers want? Un­for­tu­nate­ly, they were not giv­en an op­por­tu­ni­ty to speak at Tues­day's meet­ing, al­though they had not at­tend­ed any TCL meet­ing since Oc­to­ber 2012.

Do the TCL share­hold­ers want to sell their shares to Mex­i­can ce­ment gi­ant Ce­mex for the high­est sum in the short term?

If the share­hold­ers sell the com­pa­ny to the Mex­i­cans, are they pre­pared for the risk that Ce­mex will then close all of TCL's ce­ment pro­duc­tion ca­pa­bil­i­ty in Trinidad, Bar­ba­dos and Ja­maica and sup­ply the Caribbean from an ex­ist­ing, low­er cost Ce­mex fa­cil­i­ty? (See sto­ry on page 14.) Will Ce­mex go back to the fu­ture and make a bid to take over TCL as it did 12 years ago?

Or do the TCL share­hold­ers want the three Ce­mex di­rec­tors to work with the lo­cal board mem­bers to im­prove share­hold­er val­ue over the long term, as the com­pa­ny moves to re­struc­ture its debts and pay off the $100 mil­lion back­pay to work­ers?

Cru­el cut?

The fact that the sev­en new TCL di­rec­tors–along with ex­ist­ing di­rec­tors lo­cal busi­ness ex­ec­u­tive Wayne Yip Choy and Ce­mex ex­ec­u­tive Ale­jan­dro Can­tu–chose Es­pinet as their chair­man would have been viewed as the cru­elest cut of all by the six di­rec­tors of the com­pa­ny who sub­mit­ted their res­ig­na­tions on Tues­day af­ter­noon.

That was short­ly af­ter the Court of Ap­peal dis­missed a last-ditch at­tempt by them to get an in­junc­tion stop­ping Tues­day's spe­cial (com­pul­so­ry) meet­ing of TCL share­hold­ers. The out­go­ing di­rec­tors would have been hurt by Es­pinet's ap­point­ment as the new TCL chair­man be­cause the Andy Bha­jan/Rollin Bertrand TCL board in Au­gust 2013 had filed a com­plaint of price rig­ging with the T&T Se­cu­ri­ties and Ex­change Com­mis­sion (SEC) against Re­pub­lic Bank, Wil­fred Es­pinet and Ian De Souza.

That TCL board had al­so re­quest­ed that the SEC un­der­take an in­ves­ti­ga­tion pur­suant to Sec­tion 150 of the Se­cu­ri­ties Act in­to whether or not De Souza and Es­pinet have con­tra­vened the in­sid­er trad­ing pro­vi­sions con­tained in Sec­tions 100 to 101 of the Se­cu­ri­ties Act.

These SEC mat­ters were raised by the at­tor­ney for the for­mer TCL di­rec­tors, Claude Den­bow, dur­ing his 100-minute at­tempt on Tues­day to get the Court of Ap­peal to stop the spe­cial (com­pul­so­ry) meet­ing. But Den­bow was shot down by the Jus­tices of Ap­peal (in par­tic­u­lar, on this point, by Mau­reen Ra­j­nauth-Lee) who point­ed out that the SEC could very well "com­plete­ly ex­on­er­ate" Es­pinet from all the al­le­ga­tions that the for­mer board had made against the two men.