AIC to tap Jamaican bond market again

Marcella Scarlett, Business Reporter

Michael Lee-Chin's AIC group has already raised J$2.4 billion in debt financing since this year through broker Victoria Mutual Wealth Management Limited, and is about to tap investors again with a new private placement on which an announcement was called off on Friday.

The new US fixed rate bond placement - which will happen within a month, VM reconfirmed Tuesday - follows an underperforming bond issue that failed to meet its US$20m target in March and was held open to the end of July to tease investors into buying.

The 2011 proceeds are being used to pay down high-interest debt last restructured in late 2009 in tendentious negotiations with creditors who flirted with, but did follow through on, taking over assets pledged as collateral on the bonds.

"AIC Barbados Limited continues to monitor the market and is keeping close eye on the expected payout from CLICO to capitalise on the liquidity that will result," read an email of July 12 that Colando Hutchinson, manager of asset management at VM Wealth, said were responses from AIC.

Robert Almeida, the head of AIC Global Holdings, did not respond directly to emails sent to him for comment, nor did a promised phone call materialise.

In an update on Tuesday, Hutchinson said AIC is coming to the market with a new fixed rate US denominated bond by the end of September.

"It has already been approved by the FSC and we are working on internal processes like finalising the term sheet," he said. Hutchinson said the AIC announcement was put off so as not to compete with the IWC Capital Management's presentation of its real estate fund (see story on Page C6).

The specifications of the bond will be "tentatively, 9.5 per cent and matures in five years - similar to the other amounts previously raised". AIC hopes to raise US$5 million to US$10 million, Hutchinson told Wednesday Business.

In late 2009, in a series of negotiations with bond trustee Pan Caribbean, Michael Lee-Chin was granted a two-year reprieve by Jamaican bondholders to pay off debt on overdue notes that had previously been rescheduled in 2008.

The new repayment schedule called for 30 per cent of the debt to be paid out in December 2009, and another 20 per cent in December 2010 which was paid three months early; while the final 50 per cent would be paid by December 2011.

The funds being raised through VM Wealth is for "refinancing of maturing debt".

The VM placements include a fixed 9.5 % AIC Barbados bond in March 2011 aimed at raising US$20 million (J$1.71b) and a variable rate a AIC Jamaica Limited J$800 million bond issued two months later in early May, on which the initial coupon rate is set at 10 per cent for the first three months and payable quarterly thereafter at the six-month Treasury bill rate plus a 3-point reset.

The 9.5 per cent bond offer was first extended to July 31, beyond the payment date for the first quarterly interest payment of June 30, and still remains open, but Hutchinson said the extension did not affect the quarterly interest payment schedule listed on the term sheet.

Shy of target

He also disclosed that the bond is still shy of its target, having raised US$19.15 million, hence the second extension of the subscription period.

The two issues mature in five years, on March 31, 2016 and May 5, 2016, respectively. They are secured by NCB shares and the NCB Towers, respectively. The trustee is JCSD Trust Services Limited.

The July email through VM Wealth for which an email trail was absent - Almeida also did not respond to a request for confirmation that the responses originated from AIC - skirted a direct response to a request for AIC's bond payment schedule of redemptions and interest for May and June.

"AIC has no maturities due. The company has originally issued notes with varying terms and amounts and in keeping with its mandate to provide returns to note-holders, AIC (Barbados) Limited has successfully and consistently discharged its obligations to noteholders under the terms of the note purchase agreement. AIC Barbados has honoured all its commitments to date and has been making early payments to noteholders. The next scheduled payment is due December 2011," the email read.

However, the first interest payment on the 2011 US$20 million bond was due on June 30, according to the term sheet obtained by Wednesday Business.

And Wednesday Business also learned that AIC made an offer to creditors to roll over a 21% Jamaican dollar bond due on June 4, at least three of whom declined the offer.

Hutchinson said the funds for the June 4 maturity were distributed by AIC on time and paid from proceeds of the US$20 million bond, and that the payment to creditors was made through Donovan Lewis' Ideal Finance Corp.

All refinancing bonds, including the placement that is pending, will mature in 2016.

"We are looking to consolidate everything in the same time period," Hutchinson said.

marcella.scarlett@gleanerjm.com