Dealmaker: John L. Murphy
The Deal: Murphy represented Trinidad Cement Ltd. Group as it restructured debt totaling about $310 million.
The deal became effective June 15.
Details: Trinidad and Tobago is known for a rich multicultural history and an economy that is considerably more advanced than many of its island neighboring Caribbean nations. In 2011, for instance, the Organization for Economic Cooperation and Development removed the country from its list of developing countries.
But even highly developed countries like the U.S. were laid low by the Great Recession. And another notable victim was Trinidad Cement Ltd. Group. As tourism died, construction of Caribbean hotels dried up, and so did demand for the company’s construction materials. In this company’s case, the downturn came not long after an expensive modernization of some facilities that, in retrospect, was badly timed.
Combined, it lost roughly $70 million in 2010-11. In early 2011 it stopped servicing its debt and the outlook was ominous, with some media outlets in Trinidad openly questioning if the company could survive. The company announced it would aggressively seek to restructure its debt load.
For legal help, it turned to John Murphy, of counsel at Foley & Lardner. Formerly with White & Case, Murphy joined Foley in April 2011 as it was forming a Miami-based Latin America practice.
He had previously worked on other restructurings with FTI Consulting and BroadSpan Capital, a boutique investment bank whose main offices are in Miami and Rio de Janeiro. FTI Consulting was the financial adviser to the steering committee of creditors and BroadSpan was the financial adviser to the parent company.
“They both helped me get a meeting with TCL, where I presented my credentials and which eventually led to my being retained,” Murphy said.
Murphy knew the terrain well — in a literal sense. His wife happens to be from Trinidad, and he has visited on a number of occasions.
But this particular deal’s legal landscape was quite challenging.
For starters, the case was multi-jurisdictional to an extraordinary extent. “The classes of creditors were really mixed,” he said. Some were bondholders and local lenders in the Caribbean. Some were large banks, including U.S. giants like Citibank. The International Finance Corp., part of the World Bank, was also involved. Some debt was secured and some was unsecured.
“It was governed by different things,” he said. “They had terms all over the place.”
The first step was getting everyone on the same page. The agreement ultimately required 27 separate extensions of credit, governed by the laws of New York, Jamaica, Barbados and Trinidad and Tobago. Technically, the company’s debt was all denominated in dollars. But that’s only because that’s the name of the currency in Jamaica, Barbados, the U.S. and Trinidad.
Next, there was a need to standardize how negotiations would be conducted, since financial systems and regulations vary by location. “Just seeing how some of those common law aspects are different was valuable,” said Murphy.
“It’s like Sudoku,” Murphy said. “You have to see it as a puzzle, and there’s a solution. You’re trying to control so many variables.”
Negotiations took place in both Miami and Port-of-Spain, Trinidad’s capital.
And of course there were surprises, not all of them pleasant. For instance, even as negotiations were moving forward, workers struck at one of the company’s cement plants.
“There were issues across the Caribbean with labor,” Murphy said. “Here’s a company that’s fighting with creditors. They couldn’t possibly say, ‘Here’s an 18 percent raise.’ “
In the United States, it wouldn’t be uncommon for such companies to file for Chapter 11 bankruptcy protection. But Murphy said that wasn’t a preferred option in this case.
“It would have been too complicated to put it in bankruptcy,” he said. “Bankruptcy is a very expensive process. It was better for everyone to have a negotiated agreement.”
In the legal world, there is an unofficial term called “Chapter 22,” for companies that emerge from one Chapter 11 bankruptcy but later are forced to file another one. The creditors apparently didn’t want that to happen to Trinidad Cement, since virtually any of them could have moved to push the company into bankruptcy proceedings.
The final restructuring essentially rewrote the terms of the company’s obligations. Originally, the company had a number of primary obligors, or debtors, on its various debt instruments. Now, all of the debt is consolidated as a “joint and several obligation” of Trinidad Cement Ltd. and 11 subsidiaries.
Old, short-term debt was replaced with longer term payment plans. The maturities were extended out to 2018, with repayment of principal to begin next spring. An interest moratorium was put in place, although it expires later this year.
The conditions were confirmed and the agreement was released from escrow on June 15, becoming effective retroactively to May 10.
Asked to compare this type of assignment with corporate finance work like initial public offerings, Murphy smiled. “With initial offerings, people are a lot happier,” he said. “There is a lot of more tension in restructurings.”
Background: Murphy is a three-degree holder from Georgetown University. His bachelor’s was in international finance and Latin American studies, and he jointly earned an MBA and law degree.
He was assisted by Melisande Brodeur-Frohman. Admitted to the bar in Quebec, she is working as a paralegal at Foley while seeking admittance to The Florida Bar.
— Gregg Fields