Mon | May 28, 2018

CAC targets $200m from preference share float

Published:Wednesday | March 14, 2018 | 12:00 AM

Air conditioning firm CAC 2000 Limited plans to raise $200 million in a preference share offer that will largely provide working capital and refinance existing debt.

The shares, which mature in five years, will earn interest at 9.5 per cent per annum for the first four years. A variable rate pegged to the 6-month treasury rate, plus a reset of 3 per cent, will apply thereafter up to maturity in 2023.

The fundraising effort comes two years behind CAC's initial public offering of shares and listing on the junior market of the Jamaica Stock Exchange.

"We are growing beyond our ability to get credit terms from our suppliers so any time we get big projects we require financing," Chairman and CEO Steven Marston told the Financial Gleaner.

CAC is expecting to land a large hotel contract, according to Marston's statement in the preference share prospectus. But asked more broadly about the prospects in the hotel market, he indicated that landing business in the sector was difficult as contracts are often not advertised.

The air conditioning company sees better growth prospects in the business process outsourcing sector. In its last financial year, CAC announced that it was working with a financial firm on a commercial rental arrangement with a large BPO operation.

Under the deal, CAC would rent high efficiency systems for 10 years and maintain the units on behalf of the client.

"This idea is being pitched to other customers as it reduces their upfront capital expenditure and, in most instances, the operational saving realised by the customer pays for the equipment rental," CAC commented in the prospectus.

The company is also seeking to develop regional sales and new business venture to provide electrical micro-grids, along with water supply and treatment options to customers.

Listed companies are increasingly issuing preference shares as a financing tool, and as an alternative to loans.

"This is far better than going to the banks," added Marston.

CAC has issued preference shares before, but they occurred prior to its 2016 listing on the JSE. The company's loans and borrowing currently total $250 million, up from $1.7 million a year earlier, due to the acquisition of a large loan last year.

The current preference offer, comprising comprises 200 million units at $1 per share, is being brokered by Victoria Mutual Wealth Management. The subscription period runs from March 16 to 23.

steven.jackson@gleanerjm.com