Jamaica Producers to roll over $1.5b debt - New bond to be listed on JSE
Jamaica Producers Group Limited is refinancing debt used to acquire its large stake in port operator Kingston Wharves Limited.
It will result in the early redemption of the JPG Variable Rate 2019 Notes on September 29, and the delisting of the bond from the Jamaica Stock Exchange.
"We are taking the opportunity to lock in fixed lower long-term interest rates on debt used to finance our acquisition of KW," Managing Director of Jamaica Producers Jeffrey Hall said on Tuesday.
Hall explained that initially Producers' long-term debt for Kingston Wharves was $2 billion. The debt now stands at $1.5 billion and it is this balance that will be refinanced.
"The investment continues to give excellent results and we are satisfied that we are effectively managing the debt incurred to undertake it," said Hall. "We are rolling over $1.5 billion," he said
The food and logistics conglomerate's latest earnings report for the second quarter indicate that the group holds $3.3 billion in long-term loans, overall. Its audited accounts for 2016 indicate its debt include two corporate bonds.
Corporate Bond 1 represents a $1 billion loan, secured by shares in Kingston Wharves Limited, and repayable by year 2020.
Corporate Bond 2, the bond that JP is refinancing, represents a $1 billion loan secured on shares in Kingston Wharves, repayable in 2019. It pays interest at the Weighted Average Treasury Bill Yield, or WATBY, plus 250 basis points. The WATBY resets at each semi-annual interest payment but the effective interest rate is capped at 12 per cent for the first two years and thereafter at 14 per cent until maturity.
Hall said that the refinanced rates are fixed.
"The rates are comparable to existing rates but the benefit to us is that they are locked in for five years," he said.
JP will issue a new bond and list it in due course.
In 2015, the National Commercial Bank sold off its shareholdings and exited its investment in Kingston Wharves, which allowed Jamaica Producers to become its largest shareholder, moving from 30 per cent to 42 per cent ownership. Last year, JP reclassified the port company from an associate to a subsidiary, a move that has strengthened its own financials.
The conglomerate reported a two-thirds spike in revenue in its second quarter, a gain that largely came not from its own operations, but the contribution of the port subsidiary.
Specifically, more than half the profit reported by Jamaica Producers in the quarter was contributed by its logistics investments, the star of which is Kingston Wharves. The group made $377.6 million net profit of which $158 million was apportioned to the parent company.
Jamaica Producers holds $10.8 billion in equity on its own, but the incorporation of Kingston Wharves doubles that to $21.8 billion, the conglomerate's financials indicate.