[Editor’s note: The text for this document was released in 2014 by the now-defunct Wikileaks website at https://wikileaks.org/plusd/cables/1979GEORGE01304_e.html. This URL may be available through the Wayback Machine.]
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GEORGE 01304 261310Z
ACTION ARA-15
INFO OCT-01 ISO-00 INT-05 AID-05 CIAE-00 COME-00 EB-08 FRB-03 INR-10 NSAE-00 ICA-11 TRSE-00 XMB-02 OPIC-03 SP-02 LAB-04 SIL-01 OMB-01 /071 W
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R 261112Z MAR 79
FM AMEMBASSY GEORGETOWN
TO SECSTATE WASHDC 9259
LIMITED OFFICIAL USE GEORGETOWN 1304
E.O. 12065: NA
TAGS: EFIN, EMIN, GY
SUBJ: STATE BAUXITE INDUSTRY SIGNS US$31 MILLION LOAN
REF: GEORGETOWN A-1
1. THE BAUXITE INDUSTRY DEVELOPMENT COMPANY (BIDCO), THE STATE BAUXITE MONOPOLY, ANNOUNCED THAT A US$31 MILLION DOLLAR LOAN AGREEMENT WAS SIGNED IN LONDON WITH THE ORIN BANK GROUP. ALTHOGETHER, NINE BANKS, INCLUDING CHASE MANHATTAN AND ROYAL BANK OF CANADA, HAVE SUBSCRIBED TO THE LOAN SYNDICATION. BIDCO OFFICIALS HAVE TOLD US THAT APPROXIMATELY US$27 MILLION WILL BE USED TO REFINANCE EXISTING SHORT TERM LOANS WITH THE ORION GROUP, OF WHICH US$10 MILLION IS FALLING DUE IN 1979 AND US$14 MILLION IN 1980. ACCORDING TO A STORY IN THE “GUYANA CHRONICLE”, THE IMMEDIATE EFFECT OF THE LOAN WILL BE TO EASE PRESSURE ON THE CASH FLOW AND WORKING CAPITAL OF BIDCO IN ORDER “TO PROVIDE BREATHING SPACE TO ALLOW NEW FIXED ASSETS TO GENERATE THEIR FULL INCOME EARNING POTENTIAL.” PRIVATE BANKERS HERE TELL US THAT REPAYMENT TERMS OF NEW LOAN ARE SEVEN YEARS AT LIBOR PLUS 2-1/4 PERCENT.
2. COMMENT: AS INDICATED IN REFAIR, THE ORION REFINANCING PACKAGE IS OF CRITICAL IMPORTANCE TO GUYANA’S ABILITY TO
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MANAGE THE SUBSTANTIAL DEBT PAYMENT OBLIGATIONS ACCUMULATING THIS YEAR AND NEXT. ACCORDING TO THE 1978 WORLD BANK MEMORANDUM ON GUYANA, ROLLOVER OPERATIONS BY STATE CORPORATIONS FROM OVERSEAS BANKS (THE BULK LARGELY ACCOUNTED BY THE BIDCO/ORION REFINANCING OPERATION) WILL REDUCE DEBTS REPAYMENTS FOR 1978 THROUGH 1980 BY US$32 MILLION FROM THE US$232 NOW PROJECTED FOR THE WHOLE PUBLIC SECTOR (US$126 MILLION OF WHICH REPRESENTS DEBTS OF STATE CORPORATIONS GUARANTEED BY THE GOVERNMENT). MOREOVER, IN ESTIMATING THE FINANCIAL GAP FOR IMPLEMENTING GUYANA’S DEVELOPMENT PROGRAM, THE WORLD BANK REPORT ASSUMED THAT BIDCO AND THE MORE CREDITWORTHY STATE CORPORATIONS WOULD BE ABLE TO RAISE ADDITIONAL FUNDS OVERSEAS TO FINANCE THEIR EXPANSION PROGRAMS AND RELIEVE PRESSURE ON THE BOP. HOWEVER, PRIVATE SOURCES REPORT THAT BECAUSE OF NEGATIVE REPORTS ON 1978 PERFORMANCE OF THE ECONOMY, AS WELL AS ALLEGED GOG INVOLVEMENT WITH PEOPLE’S TEMPLE, THE ORION LOAN ORIGIONALLY [ORIGINALLY] TO BE SYNDICATED AT US$50 MILLION WAS CUT BACK TO A REFINANCING OPERATION, THE BARE MINIMUM NEEDED TO SUSTAIN BIDCO’S FINANCES.
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