JMMB plans new preference offer
Published:Wednesday | September 1, 2010 | 12:00 AM
Jamaica Money Market Brokers (JMMB) is planning to float a new preference share offer in five months to raise J$2.5 billion, a month after it is expected to pay out a similar sum to redeem two other issues that mature December 14.
The brokerage said it would redeem the JMMB 12 per cent and JMMB 12.25 per cent prefs in full and on schedule. The stocks currently trade at J$2.74 and J$3.20, respectively, on the stock exchange.
The J$2.52 billion that the redemptions will cost, will be paid from the proceeds of its own matured investments, the company told Wednesday Business.
"We already have the funds in place from maturities and as part of our liquidity buffer," said Group Chief Financial Officer Patrick Ellis.
"It's part of our buffer to have liquidity in place to repay that maturity," he reiterated.
JMMB has not finalised the price of the new preference share issue, but Ellis intimated that it would be at a lower coupon rate than the prefs the company now has on the market. The JMMB 12.15 per cent prefs, which currently trade on the market at J$2.93, mature next February.
"We do know that interest rates are coming down, so it may be a little lower than the existing rate because CDs are now at eight per cent and the Government's long term rates are trending down," he said.
"I think it may be a little lower than the previous (preference) issue given where interest rates are, at the current point."
Monthly dividend
The two prefs to be redeemed pay monthly dividend of around three cents per share each, costing JMMB a monthly J$25.7 million. The 12.15 per cent pays quarterly returns of J$47.3 million.
Ahead of the planned January 2011 preference issue, JMMB will be seeking shareholders approval to increase its authorised share capital from J$401.6 million to J$431.6 million, in order to ensure that JMMB's capital adequacy remains in line with Financial Services Commission requirements after the issue.
The ordinary shares would remain fixed at 1.5664 billion units, while three billion of fixed rate cumulative redeemable preference units with a value of J$30 million would be added.
The matter will be put to a vote at JMMB's annual general meeting on September 20, ahead of seeking FSC approval for the new preference share offer.
Ellis says there is demand for a preference issue, adding that its selling point is the regular cash flow opportunity it offers to investors.
"We have been in touch with our clients and we have surveyed the market and as you know, based on the nature of the products, there have been significant interest. They have actually asked us to do this issue," he told Wednesday Business.
The J$2.5 billion to be raised will fund JMMB's expansion into greenfield areas, said the CFO, though he declined comment on the specifics.
Group CEO Keith Duncan was a little more specific about the company's growth plans.
"As Jamaica looks to increased stability, opportunities for growth may arise. Hence, we continue to look for more of the right opportunities for our clients and shareholders," he said, in a company issued release.
"The expected in-flows from this new issue will put us in a position to take advantage of this and will allow further expansion in our new business lines, credit and pensions administration and management as well as the Dominican Republic, ultimately increasing shareholder value."
It will also pad the company's capital base, which was last audited in March at J$6.9 billion.
Its unaudited assets at June 2010 totalled J$118 billion, including a more than J$103 million investment portfolio largely built on repos; while equity in the company rose to J$7.3 billion.