Tue | Nov 20, 2018

Lee Chin's equity firm to raise US$10m from JSE listing

Published:Friday | January 15, 2016 | 12:00 AMSteven Jackson

Michael Lee-Chin's Portland Private Equity Limited intends to list a special-purpose entity called PJX on the Jamaica Stock Exchange (JSE) by April this year, based on legal advice on a transaction executed with local pension funds last fall.

The stock market listing aims to raise US$10 million and will form one of the final tranches of funds for Portland's Caribbean Fund II.

"PJX is planning an initial public offering (IPO) in April of this year," said Portland partner Mariame McIntosh Robinson, in the final of a series of interviews with the Financial Gleaner. "The plan is to raise US$10 million from the JSE," she said.

PJX, a company incorporated in the tax haven of St Lucia, raised $1.5 billion from 25 Jamaican-based pension funds in October for Caribbean Fund II. Consequently, the JSE listing forms part of their legal obligation to list.

"Yes, to be onside with pension fund law, PJX must list six months after formation, which will be April 2016," McIntosh Robinson affirmed.

There is nothing in the pension laws and regulations that actually dictate that PJX has to list, according to information from the Financial Services Commission, but financial experts say the law is "ambiguous".

Legal advice

Portland decided to list on the advice of legal consultant Sanya Goffe.

The venture capital unit at the Development Bank of Jamaica told the Financial Gleaner that listing PJX would avoid any possible ambiguity in the legal interpretation of the Pension Act, which limits the investments that pension funds can make in entities that are not listed on the market.

In March 2014, the Compass, a quarterly bulletin from the Financial Services Commission, published excerpts of a speech by Rene Gayle of law firm Myers Fletcher & Gordon on the implications of creating a sustainable venture capital and private equity environment.

In a wide-ranging speech, Gayle described a need for "clarification of the ability of pension funds to invest in ordinary shares of non-listed companies".

Outside of the pension funds, the other investors in Portland's Fund II were the Development Bank of Jamaica, IFC, Export Development Canada, the European Investment Bank, the German Development Bank, Caribbean Development Bank, the Inter-American Investment Corporation, and investors from North America.

Portland has nearly completed raising funds for Fund II, which should range between US$150 million to US$200 million. So far, Portland Caribbean Fund II has invested in CVBI, a spin-off holding company from the technology merger of Cable & Wireless and Columbus Communications. It also invested in Penonome, the largest wind farm in Panama.

McIntosh Robinson indicated that fund managers were attracted to the previous returns of Fund I at 17 per cent net internal rate of return and a net return on invested capital of 2.3 times, to date. Fund I officially ends in January 2017.

Portland investments

Investments made by Portland in its Fund I included Advantage General Insurance and Columbus Communications, which operates as Flow, Las Olas, Moya Supervisiones y Construcciones, InterEnergy Holdings and World Food. As context, Portland invested in National Commercial Bank Jamaica through an earlier entity prior to launching Fund I. The company raised US$225 million for Fund I.

Lee-Chin is also the primary owner and chairman of NCB. Assuming a successful PJX IPO, the equity outfit would join NCB as a listed company on the JSE.

PJX will allow Jamaican pension funds to add diversification to their portfolios with regional investments. Fund II expects to invest in six to eight companies over the fund's 10-year life, ending around 2024.

Fund II will ideally seek out businesses with the potential to achieve near-term revenues and earnings (EBITDA) in excess of US$100 million and US$10 million, respectively.