Jamaica Broilers refinances debt
Agri-business outfit Jamaica Broilers Group has refinanced its debt and acquired the shareholding of descendants of the founders of the company rather than allowing the stocks to be placed on the market.
A June 1, 2018 notice on the Jamaica Stock Exchange said that the group entered into an agreement prior to April 28 to lend to Jamaica Broilers Group Stockholders Nominee Limited $4.35 billion.
A portion of the proceeds was used to purchase 165.45 million shares, which changed hands at $18.23 on May 31. This was a discount on the $20.33 the previous day, which was also down on the $21 at the end of trading on May 29. The total value of the transaction would, therefore, have been just over $3.016 billion.
Group President and Chief Executive Officer Christopher Levy said the transaction was a best choice option that would end up being of benefit to all shareholders.
"Some of the descendants of the founders wanted to sell, so rather than have those shares to have the kind of impact on the market, the board saw it as an opportunity for all shareholders to benefit," he said.
The block of shares was previously held by family members of one of the founders of the company and the trustees and entities connected to them. Levy declined to name the shareholders but said the company stepped in with cash.
"The shares are in the holding of the trust company for the benefit of all shareholders on a prorated basis. Jamaica Broilers lent the money to the trust and it acquired the shares for the benefit of all shareholders," he added.
Mayberry Investments Limited acted as the broker and assisted with the transaction. Financing came from the company's reserves. Levy said that was mandated by auditors PricewaterhouseCoopers. Levy said that while it will shift some numbers, the company's balance sheet will remain strong with net assets of $20.37 billion
"For this transaction, the auditors are requiring us to take it from our capital reserves. The effect will be that there will be the shareholders trust with a certain amount and value. It would, therefore, reduce our equity, but then there would be the consolidated equity position," Levy said.
There was a similar transaction on March 13. JBG had advised on March 9 that the company borrowed $4.738 billion by way of a syndicated loan. The company further advised that the proceeds of the loan were used to refinance the company's existing debt and to prepay bonds issued by the company. National Commercial Bank took the lead on that one. Levy says while the numbers are similar and shares were involved it was purely coincidental.
"We worked with NCB to do a refinancing of a bond of about the same amount, but those two transactions are totally separate and any similarity is totally coincidental," he said.
A note in the company's annual report alluded that 'loan receivable from Jamaica Broilers trust is payable by August 2017 and interest is payable at the weighted average treasury bill yield plus two per cent per annum. The loan is secured with stock units in the group.