Shareholders pave way for NCBFG APO
Shareholders of NCB Financial Group Limited (NCBFG) approved all three resolutions at its extraordinary general meeting on Tuesday as the financial conglomerate moves to raise billions in new capital to reduce debt and further bolster its capital.
The company can now approach regulators and craft its additional public offering (APO) which will see between 300 to 450 million new ordinary shares be issued in a multibillion-dollar offer in the coming months. Resolution one received 62 votes in favour relative to 19 votes against the proposed capital raise. Resolution two, which gave the directors the authority to execute the offer as needed, received 79 votes in favour and nine against.
“So, the proposed resolutions are intended to enable the company to issue additional shares, so as to further bolster the company’s resilience to pursue growth opportunities. However, the board will exercise its best judgement to do so at quantities and at prices that optimise between the company’s needs, opportunities, as well as minimizing the dilution to shareholders. So, to be clear, we don’t expect to issue all of the authorized shares in one tranche,” said interim NCBFG Chief Executive Officer (CEO) Robert Almeida in response to shareholder queries about the offer.
A key element that was constantly repeated throughout the queries was around cutting the debt of the company which would reduce finance costs and improve profitability. This is in tandem with chairman and majority shareholder Michael Lee-Chin’s EGC (efficiency, governance and customer experience) ethos which has been the central focus to the recent ‘de-layering’ at NCBFG across its core Jamaican subsidiaries. This is expected to save more than $8 billion and reduce the cost-to-income ratio from the high 70’s to the low 60’s through operational efficiency, culling non-core assets, expense efficiency.
“These strategies have been developed with the following intended outcomes: to increase profitability, reduce debt, restore dividends and provide a platform for the acceleration of organic and inorganic growth,” Almeida added on the rationale for the offer.
NCBFG, as a standalone company, had $81.82 billion in debt at the end of September 2022 with $15.95 billion that would have been due in the 2023 financial year and the remaining due within the next five years. With several bullet maturities coming due in the next two years, the APO will help reduce the debt on the company’s books and cut its interest expense which was $6.22 billion. NCBFG’s double leverage ratio would also be reduced in turn as well.
NCBFG’s 2023 audited financials are set to be published in December and would reveal the extend of NCBFG’s company financials. Only the consolidated group financials up to June 2023 are available which includes the earnings of National Commercial Bank Jamaica Limited, Clarien Group Limited, Guardian Holdings Limited and TFOB (2021) Limited.
When asked why the company didn’t consider a rights issue or non-redeemable preference share offer, Almeida mentioned that the former would require waiting on a renunciation period to pass and the preference shares creating less capital flexibility and another layer between shareholders and their dividends. NCBFG hasn’t paid a dividend since May 2021 with the prior payment being in March 2020.
When asked by a shareholder about the size of the offer, Almeida responded, “With respect to the size, we can’t say we got a specific size in mind right now. I mentioned that what we’re looking for here is the authorization to issue. We’re looking to optimize and minimize any unnecessary dilution.
We’re kind of read the market and determine on based on our needs and opportunities at the time, what the market capacity looks like, what the pricing looks like and take all that into account to determine an optimal size to go to market at an optimal price.”
The third resolution which addressed the use of issuing unissued shares in the company to executives and employees was amended to include the words current and former. Company secretary Dave Garcia mentioned that this would extend to past staff members such as pensioners and so forth, but that the final decision would be up to the board of directors to make. Almeida and Garcia didn’t delve further into the settlement queries surrounding Patrick Hylton and Dennis Cohen, NCBFG executives who were sent on vacation in July. This resolution received 63 votes in favour and 24 votes against.
NCBFG closed the JSE at $61.72 which left it down 22.77 per cent for the first 10 months of 2023 with a market capitalisation of $152.25 billion. The stock closed the TTSE at TT$2.83 which leaves it down 37.94 per cent in 2023. NCBFG’s investor briefing is set to be held in the next two weeks where more queries on the company will be addressed.
“The APO is the final task to really put this organisation on a course that we have been used to whereby shareholders are made equally citizens in terms of the stakeholder roster. We are happy, we are proud of the job that has been done over the last three months to balance all the stakeholders. So, I want to express our appreciation, director’s appreciation, management, staff appreciation to shareholders who have been loyal to us during this most difficult period.
This is now coming to an end. It will come to an end once the dividend is announced because what really has caused the stock price to tank is as we all know is that the dividends were withheld for an extraordinarily long time. Conversely, those of us who are optimistic and can see a tangible, decisive actions are being taken will be well-rewarded for your confidence. We appreciate your patience and I assure you; your patience will be well-rewarded,” Lee-Chin closed.