NCBFG goes shopping with $40 billion debt raise ahead of financial year

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NCBFG goes shopping with $40 billion debt raise ahead of financial year

BY DAVID ROSE
Observer Business Writer

Sunday, September 27, 2020

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With less than one week to the end of its financial year, NCB Financial Group (NCBFG) has decided to tap the capital markets through NCB Jamaica (NCBJ) and Guardian Holdings Limited (GHL) for debt raises of US$175 million (JA$24.8 billion) and JA$13.4 billion respectively.

Unlike the use of a regular corporate note or global bond, NCBJ will be transferring its rights, title and interest of its United States dollar originated denominated receivables to Jamaica Diversified Payment Rights Company in the Cayman Islands as a means of securitizing its diversified payment rights (DPR). This transaction will allow NCBJ to leverage its DPR and access a broader range of the international capital markets while reducing sovereign related risk from the domestic markets.

NCBJ has processed about US$1.64 billion of DPR flows up to the end of July which was a 16 per cent decline over the prior year due to the impact of COVID-19. This has mainly been due to the decline in transaction cash flows due to economic contractions and heightened uncertainty in the global environment. Despite these events, international rating agency Fitch has given the series of notes an expected rating of BB with a stable outlook which is one rung below an investment grade rating and higher than NCBJ's revised B+ rating and negative outlook.

The transaction will represent the third issuance of this programme with the proceeds to be used to repay the remaining balances from the 2013 notes and for general corporate purposes. Although no details have been provided as to the objective of those corporate purposes, it's not unexpected that an acquisition or expansion might be in the mix of NCBFG's plans. This issue will have a 10-year tenor with a fixed interest rate and be repaid at the end of each quarter. The structure of the transaction will be such that NCBJ will have 39-month moratorium whereby only interest will be paid on the debt before the notes begin amortizing in March 2024.

NCBFG's balance sheet currently stands at $1.7 trillion with the group's bottom line recovering to $14.8 Billion following the asset price collapse in late March at the height of the COVID-19 pandemic. This is the group's second large debt raise in 2 years following the US $45 million loan used to acquire GHL. Westwood Capital LLC will act as the arranger with Citibank and Wells Fargo and the Bank of New York Mellon acting as designated depository banks.

After gaining control of GHL in May 2019, NCBFG's newest subsidiary will also be raising debt in the form of an unsecured 10-year bond with 5 tranche's ranging from 5.75 to 8.75 per cent per annum. With NCB Capital Markets acting as one of the selling agents, this transaction will represent one of the largest transactions undertaken in recent times by the regional insurance group. GHL should benefit from the transfer of NCB Insurance's insurance and annuities business to its local subsidiary Guardian Life Limited after gaining regulatory approval.


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