PriceSmart borrows US$12m to finance T&T operations
PORT OF SPAIN – Warehouse shopping giant PriceSmart has borrowed US$12 million from Citibank to finance its operations in US dollar-starved Trinidad and Tobago.
In its US Securities and Exchange Commission (SEC) filing on April 6, PriceSmart said: “The company has evaluated all events subsequent to the balance sheet date of February 28, through the date of issuance of these consolidated financial statements and has determined that, except as set forth below, there are no subsequent events that require disclosure.”
PriceSmart then listed the financing transaction: “On March 31, the company’s Trinidad subsidiary entered into a loan agreement with Citibank, NA. The agreement provides for a US$12.0 million loan to be repaid in eight quarterly principal payments plus interest. The interest rate is set at the 90-day LIBOR rate (1.8 per cent) plus three per cent. The loan was funded on March 31.”
PriceSmart also said consumer spending was down in T&T.
“In some of our Central American and Caribbean markets, overall economic activity during the first half of fiscal year 2017 has been sluggish, which has adversely affected the level of consumer spending during the period. For example, Trinidad’s economy, which has been significantly harmed by declining oil and gas exports and which has been further slowed by government policies intended to manage its foreign exchange reserves, has been experiencing overall difficult economic conditions with a corresponding impact on consumer spending,” PriceSmart said in its SEC filing.
The company said in its SEC filing: “From time to time we have experienced a lack of availability of US dollars in certain markets. This impedes our ability to convert local currencies obtained through warehouse sales into US dollars to settle the US dollar liabilities associated with our imported products. In the second half of fiscal year 2016 and continuing into fiscal year 2017, we have been experiencing this situation in Trinidad.
“We are limited in our ability to convert TT dollars that we generate through sales of merchandise into US dollars to settle US dollar liabilities, increasing the amounts owed to PriceSmart, Inc from our Trinidad subsidiary. We are working with our banks to source other tradeable currencies (such as euros and Canadian dollars), but until the central bank in Trinidad makes more US dollars available, this condition will continue.
However, PriceSmart said it is adjusting prices to suit the new costs of foreign currency.
“We also incurred higher transaction costs associated with converting TT dollars into available tradeable currencies such as Euros or Canadian dollars before converting them to US dollars. While that situation continues in Trinidad, we have taken that additional cost into consideration in our pricing model.” (Trinidad Express)