Marcella Scarlett, Business Reporter
Access Financial Services, the pioneer stock on the Jamaica junior stock exchange, is again tapping the market for capital, but this time has opted to raise debt via a short-term corporate bond.
In anticipation that the demand for loans will rise in the short term, Access Financial is itself borrowing J$102.5 million from investors through the debt market to grow its loan book.
The bonds are expected to list on the bond market of the Jamaica Stock Exchange, which was launched this year and is yet to list any securities.
The moneylending agency, which lends relatively small sums at high interest to the risky microsector, is floating an unsecured bond at 9.0 per cent coupon that becomes due in 13 months on November 2014.
"Interest will be calculated daily based on a 365-day year and will be due and payable six months from the issue date, in April 2014, and then any remaining interest shall be payable on maturity," the prospectus says.
Mayberry Investment Limited, which is the second-largest shareholder of the company after CEO and founder Marcus James, is also the lead broker for the transaction. The offer will open on October 8 and close October 15.
Applications are to be made in multiples of J$500,000.
The notes will be issued at a price of 97.99649 per cent of the face value of each note, representing a discount of 2.00351 per cent. The offer is priced to yield 11 per cent.
It is not clear why the offer is discounted. Discounted offers typically indicate a sign of distress and are usually secured.
Gary Peart, CEO of Mayberry Investment, said he was travelling and unable to comment, while redirecting the Financial Gleaner to his vice-president, Tania Waldron. Calls to Waldron were unanswered on Wednesday and Thursday.
James also did not answer calls placed to his mobile phone nor respond to messages left at his office.
However, analysts to whom the Financial Gleaner spoke said such discounted bonds, as structured for Access, are a signal that the issuer wants to raise funds right away to finance an immediate need.
The feedback on the offer is that it is attractive to investors, according to one analyst from a competing investment company, who requested anonymity.
"This seems to be an opportunity — borrow at 11 per cent and then lend back at more than 40 per cent. Everybody wins," he said.
"There seems to be tightness in the market and they need the funding so they are offering a good rate; plus, this is cheaper than they could get anywhere else."
Access is a 13-year-old company that went public in 2009. It is the second junior market company to announce a bond float via the JSE (see related story on this page).
The company is cash positive with J$37 million of holdings at June 2013. Its annual cash haul in the past five years have ranged between J$22 million and J$48 million.
Profits, too, have grown sevenfold within the period, from J$33 million in 2008 to J$238 million last year, while revenue has tripled from J$218 million to J$634 million in the same period. Access also claims an eightfold growth in its loan book over its lifetime.
"Loans made by the company have grown from under J$100 million when it began trading in 2000, to a net loan portfolio of J$801 million at the end of December 2012," the prospectus said.
Loans grew 18 per cent last year, it said. Its debt-to-equity ratio at yearend 2012 was 47 per cent. That was an improvement on the previous year's 64 per cent.
The Access offer document states that the proceeds from the debt raising will fund expansion of the company's loan portfolio, as well as working capital and general corporate purposes.
Access plans to expand by developing its retail network. The company currently operates 15 branches across Jamaica.
Access Financial is a provider of micro, small and medium-size business loans as well as personal loans and hire purchase facilities.
"Traditional lenders do not offer a wide range of products for MSMEs and some do not target the sector at all. The company's strategy is to focus on the sector, and it has developed special products for it," the offer document said.
Additionally, the document said the company intends to expand by "developing" its retail network.