National Commercial Bank Jamaica Ltd (NCB) disclosed overseas that it plans to set up a new holding company, which will result in a share swap for shareholders.
The new entity forms part of regulatory requirements affecting all of the nation's commercial banks, NCB told prospective US investors.
The disclosure was included in its latest update on its planned US$225 million IPO listing on the New York Stock Exchange. No similar market filing has been made in Jamaica, NCB's home market.
"We expect that the conversion will involve the bank becoming a subsidiary of a holding company incorporated in Jamaica upon approval of the transaction by a Jamaican court following a hearing," the bank stated in the US filing.
"In connection with this holding company conversion, holders of our ordinary shares, including the depository for the American Depository Shares (ADS) being offered pursuant to this prospectus, will exchange their ordinary shares for ordinary shares in the holding company ... " .
NCB said there would be no Jamaican tax implications for holders of ordinary shares in connection with this conversion. However, US shareholders who own over five per cent of the holding company will need to examine the tax implications.
"US holders should recognise no gain or loss for US federal tax purposes as a result of the conversion, assuming it occurs as we intend it to occur and assuming no changes in applicable law occur between the date hereof and the date of the conversion," the bank said.
"However, US holders of our ordinary shares and/or ADSs, who will own five per cent or more of the holding company's ordinary shares and/or ADSs immediately after the conversion must enter into a five-year gain-recognition agreement with the US Internal Revenue Service to avoid the recognition of any gain realised on the conversion to a holding company."
The Bank of Jamaica requires all commercial banking groups in Jamaica to restructure to facilitate comprehensive supervision of their businesses.
The BOJ primarily supervises deposit-taking institutions, including banks. The Financial Services Commission supervises most non-deposit-taking financial institutions, including insurance companies and securities brokers.
"The specific timing for this holding-company conversion has not yet been determined, but is currently expected to take place by the end of fiscal year 2013," stated NCB. The bank's fiscal period ends in September.
Scotia Jamaica itself executed a court-sanctioned scheme of arrangement in 2007 in which the shares in Bank of Nova Scotia Jamaica were transferred to newly created parent company Scotia Group Jamaica. Scotia Group's businesses include a commercial bank, a life insurance operation, a building society, and a securities dealership.
At the time, Scotiabank Jamaica argued that the 'reconstruction' was needed to allow its shareholders to fully participate and benefit from its acquisition of Dehring, Bunting & Golding (DB&G), now known as Scotia Investments Jamaica Limited.
They argued that the reconstruction would better reflect the ownership of BNSJ and DB&G under the new corporate umbrella Scotia Group.
The NCB group comprises the commercial banking operation, a life insurance business, and a wealth management subsidiary. It is finalising the acquisition of a finance company and a general insurance business.
The date for NCB's IPO in New York is still to be set more than a year after it was initially announced.