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Fitch Affirms Clarendon Alumina Production's FC & LC IDRs at 'B-'; Outlook Stable
Edited by : AL CIRCLE
3 min read
Fitch Ratings has affirmed Clarendon Alumina Production Limited's (CAP) foreign and local currency Issuer Default Ratings (IDRs) at 'B-'. The Rating Outlook is Stable. Fitch has also affirmed CAP's USD200 million 8.5% unsecured notes due November 2021 at 'B-/RR4'. The notes continue to be supported by an explicit unconditional and irrevocable guarantee by the Government of Jamaica (GoJ) for the timely payment of interest and principal.
CAP's ratings are directly linked to the GoJ. CAP is 100% owned by the GoJ and is the holding company for its 45% ownership in a joint venture with a subsidiary of Alcoa called Jamalco, which is a bauxite mining and alumina refining operation in Jamaica. Jamalco is an unincorporated joint venture association that involves the proportionate sharing of production costs and the alumina output of the Clarendon Alumina Refinery (CAR). CAR's current production rate is about 1.36 million tons per year.
As a result of unfavorable long-term contracts, CAP generated negative EBITDA of USD39 million during fiscal year 2011 and has exhibited negative EBITDA since 2007. Fiscal year 2011 revenues of USD127 million were based on total alumina sales of 602,202 metric tons with an average price per ton of USD209. This compares as a flat performance to fiscal year 2010 revenues of USD126 million. CAP is obliged to fund its share of running and operating expenses at CAR, and it would be unable to meet these obligations without support from the GoJ.
The GoJ guaranteed approximately 90% of CAP's total debt as of the fiscal year end March 31, 2011. CAP is unable to meet its debt commitments on a standalone basis and requires grants from the GoJ to service these obligations. CAP received USD17 million in grants from the GoJ during fiscal year 2011. These grants also ensure that CAP is able to perform to the level required to meet its supply agreement obligations with customers.
The GoJ announced in 2009 that it is seeking to sell its 45% stake in Jamalco, and Fitch understands that this process is ongoing and that it should reach a resolution in 2012. Fitch notes that Alcoa has a right of first refusal on buying the shares. CAP's USD200 million 8.5% unsecured notes due 2021 are subject to a change of control clause which creditors may choose to activate. Should any potential change of control result in effective acceleration of the obligation, Fitch will review for possible rating action.
Should CAP not be sold, its future rating actions are directly linked to Fitch's actions taken on Jamaica. If Fitch were to further downgrade the ratings on the sovereign due to concerns regarding macroeconomic pressures, or upgrade the ratings due to liquidity improvement, then CAP's ratings would also mirror this action. This rating linkage will continue as long as the company remains 100% owned by the GoJ.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
CAP's ratings are directly linked to the GoJ. CAP is 100% owned by the GoJ and is the holding company for its 45% ownership in a joint venture with a subsidiary of Alcoa called Jamalco, which is a bauxite mining and alumina refining operation in Jamaica. Jamalco is an unincorporated joint venture association that involves the proportionate sharing of production costs and the alumina output of the Clarendon Alumina Refinery (CAR). CAR's current production rate is about 1.36 million tons per year.
As a result of unfavorable long-term contracts, CAP generated negative EBITDA of USD39 million during fiscal year 2011 and has exhibited negative EBITDA since 2007. Fiscal year 2011 revenues of USD127 million were based on total alumina sales of 602,202 metric tons with an average price per ton of USD209. This compares as a flat performance to fiscal year 2010 revenues of USD126 million. CAP is obliged to fund its share of running and operating expenses at CAR, and it would be unable to meet these obligations without support from the GoJ.
The GoJ guaranteed approximately 90% of CAP's total debt as of the fiscal year end March 31, 2011. CAP is unable to meet its debt commitments on a standalone basis and requires grants from the GoJ to service these obligations. CAP received USD17 million in grants from the GoJ during fiscal year 2011. These grants also ensure that CAP is able to perform to the level required to meet its supply agreement obligations with customers.
The GoJ announced in 2009 that it is seeking to sell its 45% stake in Jamalco, and Fitch understands that this process is ongoing and that it should reach a resolution in 2012. Fitch notes that Alcoa has a right of first refusal on buying the shares. CAP's USD200 million 8.5% unsecured notes due 2021 are subject to a change of control clause which creditors may choose to activate. Should any potential change of control result in effective acceleration of the obligation, Fitch will review for possible rating action.
Should CAP not be sold, its future rating actions are directly linked to Fitch's actions taken on Jamaica. If Fitch were to further downgrade the ratings on the sovereign due to concerns regarding macroeconomic pressures, or upgrade the ratings due to liquidity improvement, then CAP's ratings would also mirror this action. This rating linkage will continue as long as the company remains 100% owned by the GoJ.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
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