Reuters
Fitch revises Clarendon Alumina Production outlook to negative
Edited by : AL CIRCLE
2 min read
Fitch Ratings has affirmed Clarendon Alumina Production Limited's
(CAP) foreign and local currency Issuer Default Ratings (IDRs) at 'B-'. 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. The Rating Outlook is revised to Negative from
Stable.
The Negative Outlook on CAP's ratings follows the revision of Jamaica's Outlook to Negative on Jan. 18, 2013 to reflect rising financing constraints in the context of elevated fiscal and external imbalances. 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 production rate during fiscal 2012 was 1.27 million tons, down on normal average production of 1.36 million tons due to power issues during the fiscal year.
CAP's negative cash flow generation is primarily due to the long-term inflexible supply contracts which have constrained the entity's ability to pass on higher caustic soda and fuel input costs. CAP has two remaining unfavorable alumina off-take contracts for a total of 652,500 metric tons in 2013 and 637,500 metric tons in 2014 and the same amount in 2015, at fixed terms. The remaining onerous contracts expire in 2015.
As a result of the unfavorable long-term contracts, CAP generated negative EBITDA of USD44.7 million during fiscal year 2012 and has exhibited negative EBITDA since 2007.
CAP is unable to meet its debt commitments on a standalone basis and requires grants from the GoJ to service these obligations. CAP received grants from the GoJ of USD87 million in fiscal 2012 and USD17 million in fiscal 2011. These grants ensure that CAP is able to perform to the level required to meet its supply agreement obligations with customers. 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 Negative Outlook on CAP's ratings follows the revision of Jamaica's Outlook to Negative on Jan. 18, 2013 to reflect rising financing constraints in the context of elevated fiscal and external imbalances. 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 production rate during fiscal 2012 was 1.27 million tons, down on normal average production of 1.36 million tons due to power issues during the fiscal year.
CAP's negative cash flow generation is primarily due to the long-term inflexible supply contracts which have constrained the entity's ability to pass on higher caustic soda and fuel input costs. CAP has two remaining unfavorable alumina off-take contracts for a total of 652,500 metric tons in 2013 and 637,500 metric tons in 2014 and the same amount in 2015, at fixed terms. The remaining onerous contracts expire in 2015.
As a result of the unfavorable long-term contracts, CAP generated negative EBITDA of USD44.7 million during fiscal year 2012 and has exhibited negative EBITDA since 2007.
CAP is unable to meet its debt commitments on a standalone basis and requires grants from the GoJ to service these obligations. CAP received grants from the GoJ of USD87 million in fiscal 2012 and USD17 million in fiscal 2011. These grants ensure that CAP is able to perform to the level required to meet its supply agreement obligations with customers. 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
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