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The product was a refinancing package for a natural-gas exploration project off the southern coast of Trinidad. Lacking the postcard beaches that draw tourists to neighboring islands, Trinidad depends mostly on oil and industry. The Trintomar venture stumbled over a series of drilling mishaps and in 1992 was in danger of defaulting on a loan to Nissho Iwai, a Japanese company that had financed the project. Three big international lenders submitted proposals to refinance the $61.5 million balance owed to Nissho Iwai. The plans were similar, but with its long history in Trinidad, Citibank emerged as the front runner.
Citibank proposed a deal in which it would buy Trintomar's accounts receivable (two-year contracts to supply petroleum to Shell and Texaco) for $66 million--a little more than was needed to pay off the Japanese loan. Trintomar agreed in principle and began talks with Citibank to finalize the terms. But then the bank changed the game. In addition to the loan they had been talking about, Citibank wanted to finance a second loan of $96.5 million. It was analogous to someone going to borrow money for a car, and as a condition of the deal, the lender insisted that he borrow more than twice what he needed--and pay fees and interest on the whole thing.
Why did Trintomar agree to these terms? Seereeram and other critics say it was a sort of bait and switch. Citibank met with Trintomar three times in the spring of 1992 to pitch its original $66 million refinancing proposal, and in a letter dated Sept. 9, Trintomar asked for a formal proposal. The next day, Citibank sent a letter outlining the extra $96.5 million loan in several pages of eye-glazing detail. Trintomar officials, thinking the smaller loan was still on the table, kept negotiating. As Trintomar edged closer to default, the managing director of Citibank Trinidad, Suresh Maharaj, turned up the pressure. "I am sure that you will appreciate that we cannot hold open a commitment for this amount of $96.5 million indefinitely," he wrote on Dec. 1. "I have just visited my head office, and this matter was discussed in detail ... There are Citibank clients in other countries willing to use these funds having already signed their respective commitment letters." Now facing default, Trintomar accepted the extra $96.5 million it didn't need. With the refinancing in place but the gas exploration project then failing, Trintomar found a firm to sublease its production facility in late 1992--an up-and-coming Houston outfit called Enron.
The loans were paid, and Enron (now EOG Resources in Trinidad) started pumping millions of cubic feet of gas through the platform every day. The deal eventually faded from view, until a new chairman arrived at Trinidad's state-owned oil company. Donald Baldeosingh was only 34 when he took the post and was determined to make Petrotrin efficient and profitable. He wondered how the Trintomar venture could have got into such a poor lending deal and asked a London law firm to look into it. The firm retained David Hudson, a retired British merchant banker, who responded with a scathing report, a copy of which TIME obtained.