Eppley goes back to market
Eppley Limited will go back to the market on November 4 to raise $250 million via an offer of 4.666 million redeemable preference shares at $6 each.
The announcement followed shareholder approval of the creation of 20 million new preference shares at an extraordinary general meeting Tuesday morning.
The offer, being brokered by JMMB Securities Limited, comes one year after a similar raise by the junior market company, which then issued more than 60 million 9.5 per cent pref shares.
It will be Eppley's third shot at the market that started with its mid-2013 initial public offering on the JSE Junior Exchange.
The new prefs are structured as a step-up offer, to mature in five years on November 30, 2019, but may be redeemed after three years.
The shares will bear a coupon of 10 per cent in the first two years, with a step-up to 11 per cent in years three and four, and to 11.5 per cent in year five. Dividend will be paid monthly. The 9.5 per cent offer was also structured to mature in five years.
Nigel Clarke, chairman of Eppley, said at the investors briefing on Tuesday that the success of the last issue, which raised $300 million at $6 per share, was what influenced the company to tap the market again so soon.
"All that we told you we would do, we have done," said Clarke, noting that the proceeds of the new offer would be used to expand the company's portfolio of loans, leases and insurance financing, as well as the costs of the issue.
Eppley does not target the mass market but "cherry picks" the companies and professionals to whom it lends.
Redeeming new preference
Redemption of the new preference share offer is possible in three years from the issue date at either the invitation price plus one per cent or the market price at the notification date, whichever is higher, plus any accrued and unpaid dividends.
The offer will open for a week from November 4 to 11. Minimum subscription is 5,000 shares, with additional multiples of 1,000 shares.
Nicholas Scott, managing director of Eppley, said the company was likely to double assets before the 2019 redemption. At year end 2013, he said, Eppley grew annual profit from $15 million to $39 million, and had made $30 million, so far, in 2014.
The company has expanded its loan portfolio from $427 million to $729 million, backed by the proceeds of the last preference share issue, Scott indicated. The best return, he said, came from insurance premium financing with 30 per cent returns, followed by loans and leases with 15 per cent.
Scott said that only 18 per cent of the company's assets were exposed to the performance of the Jamaican economy, as the holdings comprised 16 per cent cash, 19 per cent loans and leases to regulated institutions, 25 per cent of investments in multinational companies, 17 per cent in non-Jamaican corporate securities, while six per cent is invested in local firms with earnings in hard currency.
The company has a capital base of $336 million. Debt is currently 1.3 times capital.
"Our assets, on average, will turn into cash in 2.5 years," said Scott. "We will turn over our assets twice."
Eppley went public in mid-2013, with 796,249 ordinary shares listed on the junior market following an IPO priced at $377 million. The stock traded at $380.