Clarendon Alumina Production Limited (CAP), part owner of the Jamalco bauxite refinery at Halse Hall, Clarendon, has retained its B+ rating from Fitch on its US$200 million bond.

The ratings agency noted that the company's financial position had deteriorated and its debts had climbed in the past year, saying "CAP's financial profile is extremely weak for the rating category."

But Fitch appeared comforted by the "explicit unconditional and irrevocable guarantee" by Government for timely payment of interest and principal on the notes.

It said, too, that the rating was pegged to the strength of CAP's joint venture partner, Alcoa Minerals of Jamaica, which has a 55 per cent stake in the refinery.

The 15-year CAPJAM 2021 bond was issued last November at a coupon of 8.5 per cent. It's currently yielding 7.59 per cent.

The bond proceeds financed existing debt servicing and working capital.

PRODUCTION GOOD

Jamaica's alumina sector has 4.45 million tonnes of installed refining capacity, with Jamalco commanding 1.425 million tonnes or approximately 32 per cent.

The sector has operated at about 92 per cent of capacity over the past two years.

At year end 2007, Jamalco produced 1.3 million tonnes of alumina, said Fitch, with CAP's then 50 per cent share earning the company revenues of US$132 million from the sale of 636,200 tonnes of alumina.

According to Fitch, CAP's operations were US$11 million in red as at March 2007 - a significant difference to the near US$6 million of unaudited operating profit off sales of US$146 million reported out of the Finance Ministry earlier this year

This position, said Fitch, was a worsening of the US$3.8 million earnings before interest taxes depreciation and amortisation (EBITDA) reported at year end March 2006.

DEBT INCREASE

"More importantly," it said, "CAP's total debt has increased US$120 million, or more than 70 per cent, to US$286 million."

The year before it was US$166 million at the end of March 2006.

Finance Ministry figures suggest that the company's debt is expected to climb even higher within this year to about US$320 million.

Its net debt, which is the combined long and short-term debt less cash and cash equivalents, rose by $95 million at yearend March, and added another US$25 million, said Fitch, during the June 2007 quarter.

"Given the deteriorating financial profile of CAP due to increased operating costs, capital expenditures and total debt levels,"said Fitch, "the company will likely continue to require loans from the GoJ to meet upcoming debt maturities and interest payments and to fund capital expenditures projected to total US$70 million over the next three years."

lavern.clarke@gleanerjm.com