Mayberry Investments Limited is planning to raise $1.2 billion with the ability to upsize to $5 billion in its public bond offering (PBO) which is set to open between October 28 to November 28.

The secured notes corporate bonds will be done in four tranches with each tranche being equivalent to $300 million as per the indicative term sheet. The proceeds will be used to expand its loan portfolio, provide working capital and for general corporate purposes. Expenses associated with the invitation will be paid out from the proceeds. The minimum application is $20,000 with increments done in multiples of $10,000.

Mayberry’s client margin portfolio grew 28 per cent to $2.13 billion at the end of 2021 with client receivables at $1.88 billion. The consolidated loans and other receivables line item was $5.09 billion in 2021 with the portfolio growing to $7.73 billion at the end of June.

Tranche I will have a fixed interest rate of 9.25 per cent for 13 months. Tranche II will have a fixed interest rate of 10.00 per cent for 18 months. Tranche III will have a fixed interest rate of 11.00 per cent for 24 months. Tranche IV will have a fixed interest rate of 12.00 per cent for 36 months. All tranches will pay interest quarterly and have principal repaid at maturity. Mayberry can voluntarily prepay the bonds or redeem the bonds early at par, all or some of the bonds in issue without premium or penalty prior to maturity subject to a 30 days’ notice and on an interest payment date.

The bonds will be listed on the Jamaica Stock Exchange’s (JSE) bond market. The bond will rank at least pari passu to all other current or future secured indebtedness and senior to any outstanding future secured indebtedness, preference and common shares. The covenants include a maximum leverage ratio of 4.0 times total equity and a minimum current ratio of no less than 1.20 times.

This issue comes days after Mayberry issued an unsecured corporate note at a fixed rate of 10 per cent for two years to refinance $2 billion of debt. It’s also the first time in four years since a company has listed on the JSE’s bond market. Caribbean Producers Jamaica Limited listed its $500-million (US$3.34-million) bond in June 2019 after raising the funds under the guidelines for exempt distributions with maturity set for May 2023. It’s currently one of the two remaining bonds on that market with Access Financial Services Limited’s (AFS) $900-million variable rate bond due October 2025. AFS was the first company to list on the JSE’s relaunched bond market on October 18, 2013 when it raised $102.50 million. All of the companies which have raised funds using the bond market have been companies listed on the Junior Market at the time they raised the funds.

“I think if you look across the board, there’s been a reduction in activity in trading of these positions especially in the fixed income market. As interest rates rise, the value of those assets will fall a bit and to the extent that investors have the ability to hold their guaranteed return with which they made their initial investment, but if they were to sell into a rising interest rate environment, their experience would be a little bit less than they would have targeted. So, there are natural technical reasons for a reduction in activity in the bond market,” said JSE Chairman Julian Mair at the company’s annual general meeting held last month.

The JSE’s bond market has had relatively nascent trading over the years with Access Financial and Caribbean Producers trading at their face value of $100 as of Friday. This came at a time when the Junior Market was exploding with listings and larger Main Market listings and transactions were occurring. Such examples include Mailpac Group Limited’s initial public offering (IPO) with a transaction value of $495 million which was oversubscribed by 300 per cent within days of the offer officially opening. There was also the Wigton Windfarm Limited and TransJamaican Highway Limited IPO’s where the Government of Jamaica raised $5.5 billion and $14.1 billion, respectively. The Bank of Jamaica (BOJ) had also reduced its policy rate to a historical low of 0.50 per cent in August 2019 as the economy continued to expand.

In September 2019, ISP Finance Services Limited’s $150-million bond which was listed on the JSE’s bond market matured. The original issue had a minimum of $20,000 and increments in multiples of $10,000.

While the JSE’s bond market continued to see relatively low take-up, the JSE launched its private market on January 11, 2021 with Guardian Holdings Limited listing tranches B and D of its bond on February 16 valued at $6.99 billion. There were 11 securities listed on the JSE’s Private Market in 2021 including West Indies Petroleum Limited which listed five tranches of cumulative redeemable preference shares valued at around $5.63 billion.

Future Energy Source Company Limited listed its $1-billion bond on April 12 while Dolla Financial Services Limited intends to list its bond which is set to close this Tuesday. Dolla’s bond is being done in two tranches and had an initial target of $1 billion, but is set to be upsized to $1.5 billion.

The advantage of the JSE’s bond market is that almost any investor has access to the market which has a lower minimum subscription amount while the private market is restricted to participants who can participate in exempt distributions under the Financial Services Commission’s guidelines. This is limited to accredited investors who can be an individual who has earned $10 million before taxes in each of the two most recent calendar years or one who has a net worth exceeding $50 million.

“However, as we continue to build out the platforms on the fixed income side, you’ll see more listings. Don’t think that our new bond market, which is relatively new with only two listings, is a sign of a market that is not likely to grow. Debt is the largest component of traded assets in the country and throughout the region. We are currently playing a much larger role in that space in the area of trustee services in the role that we play for registering of exempt distribution assets. We will see more and more of those fixed income securities listed on the bond market,” Mair closed.