Sherritt International Corp., one of Cuba's largest foreign investors, has warned investors that its ability to continue as a going concern is in doubt after former U.S. President Donald Trump expanded sanctions on the Caribbean nation. The Toronto-based company said its ability to meet or refinance its debt “remains uncertain” following Trump's executive order targeting foreign companies operating in Cuba.
Credit facility at risk
The terms of Sherritt's $79.5 million credit facility allow lenders to declare a default and demand early repayment due to the executive order, the company said in interim results published Thursday. Sherritt stated it would not have enough cash to repay if lenders exercised that right and would need to seek alternative financing. In that case, bondholders may also have the right to demand early repayment.
Production halted in Cuba
Sherritt halted production at its nickel and cobalt mine in eastern Cuba in February because of a dire energy crisis on the island. In May, the company delayed the release of its first-quarter results after Trump issued his order, and its chief financial officer and auditor resigned. The company initially moved to dissolve its joint venture with a Cuban state-owned company and exit the island, but later announced a preliminary financing deal to sell a controlling stake to Gillon Capital LLC, the Texas-based family office of a former Trump adviser.
Alberta refinery idled
While Sherritt entered into exclusive talks with Gillon earlier this month, its Cuban operations remain shuttered. This week, Sherritt announced it was idling its Alberta refinery—one of only three facilities in North America that processes nickel and the only one that refines cobalt—because its supply of raw material from Cuba had dried up.
“The company has and will undertake numerous initiatives available to it to continue to strengthen its financial position and enhance liquidity,” Sherritt said, citing cost and workforce reductions, capital spending cuts, payment deferrals, and a recent equity injection.
Material uncertainty
However, the production halt and Trump's expanded sanctions “result in material uncertainty which may cast significant doubt about the Corporation’s ability to continue as a going concern,” Sherritt warned.
