Derrimon to issue 125 million preference shares
Derrimon Trading Company shareholders on Wednesday approved the creation of a new class of preference shares, which will be floated on the stock market.
Derrimon, owners of the Sampars Cash & Carry retail chain, plans to issue 125 million redeemable prefs by the end of this quarter in a move aimed, it said, at realigning the debt structure of the company.
Only six persons, plus Derrimon staffers, were present at the special meeting, which was over in about 15 minutes, but the company only needed a quorum of two. The shareholders voted to redesignate 125 million units of the company's authorised ordinary shares as preference shares. The prefs will carry voting rights, as well as a right to dividends and participation in surplus capital were the company to be wound up.
Derrimon's authorised capital comprises 400.4 million ordinary shares of which 273,336,067 are issued shares that were listed on the junior market of the Jamaica Stock Exchange in 2013. Just over 127 million shares are unissued.
The targeted fundraising from the preference share offer was not disclosed.
Tania Waldron-Gooden, senior vice-president of corporate financing, research and special projects at Mayberry Investments Limited, the firm that advises Derrimon, said the plan still has to go through stages of approval.
"The structure is not yet finalised. We will give it to the board to create closer to the time, because the regulator has to approve the documents and some of them take longer than usual," Waldron-Gooden said.
At last disclosure in September 2014, Derrimon had debts totalling $1.25 billion, of which 70 per cent was due in the short term. The trading company's total liabilities were then four times its equity capital.
Derrimon's borrowings include an 18-month $200-million bond issued to accredited investors in February 2014 at a coupon rate of 12.25 per cent. The bond proceeds were used to pay down more expensive bank debt, with Mayberry noting at the time that Derrimon was seeking a more equitable debt-equity mix.
Up to that point, the trading company was largely in debt
to National Commercial Bank Jamaica and was servicing loans at varying interest rates, ranging up to 22.88 per cent.
"Our objective is not to increase debt, but to realign to pay down those which are costing us 17 and 18 per cent ...," Derrimon's chief financial officer Ian Kelly said on Wednesday.
The preference offer is in line with the capital remix strategy.
Because the company buys and distributes a lot of commodities, it has further need for financing because it is capital intensive, said another company representative.
"We have moved into more retail stores, we have done majority stakeholding in Caribbean Flavours, so our objective at this point in time is to look back at our debt structure and to aligned our debt structure with our operating revenues," added Derrimon's finance chief.
Derrimon acquired 49 per cent of Caribbean Flavours & Fragrances Limited last August for $121 million. Two months later, in October, it also bought My Neighbourhood Supermarket, based in Old Harbour, St Catherine, which was merged with Sampars.
The 12,000-square-foot My Neighbourhood outlet has been rebranded as Sampars Old Harbour. Derrimon declined to disclose details of the transaction, including the seller, but a search of Companies Office of Jamaica records indicates that the business was owned by the Campbell family through a company called Your Choice Products & Imports Limited.
Kelly said the company acquired the assets of the supermarket but not the real estate, opting instead for a long-term lease agreement for the building.
If approved, Derrimon's pref offer will be the third for the junior market, the other two being flotations by Eppley Limited.