JMMB Group Limited (JMMBGL) will be seeking to extend the tenure of four cumulative redeemable preference shares by approaching preference shareholders at a general meeting in the coming weeks.

These preference shares are set to mature come January 14, following the eight-year timeline that they have been in issuance. These securities were issued in January 2016 for $7.09 billion and had a carrying value of $8.33 billion as of March 2023. The higher carrying value is due to the depreciation of the Jamaican dollar over that timeline, especially since the JMMBGLUSD6.00 preference share made up the bulk of that 2016 issue at US$42.78 million at US$1.00 per share.

The other preference shares include JMMBGLUSD5.75 at US$1.50, JMMBGL7.50 at $1.00, and JMMBGL7.25 at a $1.50 maturity price. JMMBGL will be seeking to vary the terms of each issue. All JMMBGL US dollar (USD) preference shares and the Jamaican dollar (JMD) preference shares maturing in 2028 are fixed rate for their period of issuance. JMMBGL’s JMD preference shares pay dividends monthly, while the USD preference shares pay quarterly.

“The preference shares being referred to in this disclosure represent Tier 2 capital — capital which is distributed across the subsidiaries. As you know, JMMBGL has routinely offered preference shares to help maintain and/or improve its Tier 2 capital ratio. However, you will also recall that the approach that JMMBGL has historically employed is one of offering new preference shares by way of prospectus,” JMMB Group said in an e-mail to the Jamaica Observer.

JMMB Group also added, “As these named preference shares are approaching maturity, JMMBGL has decided to employ a different, more efficient and win-win approach for all, that of hosting a general meeting for preference shareholders so as to procure a variation of the terms of the preference shares (that is, their coupon rate and tenure). This approach, as opposed to offering via prospectus, is a far less time-consuming method, is more administratively efficient, and makes it easy for shareholders as well.”

The 7.50 and 7.25 per cent preference shares are variable rate preference shares, which means that the interest rate attached to them changes every January 14 based on a formula of 1.00 per cent plus the Government Of Jamaica’s 180-day weighted average treasury bill yield (WATBY).

As a result, these JMD preference shares paid 2.30 per cent in 2021, 5.34 per cent in 2022, and 9.30 per cent in 2023. This effectively means that if an investor held $100,000 worth of the JMD preference shares, they’d have seen an increase in dividend payments from $2,300 in 2021 to $9,300 in 2023.

JMMBGL also has four preference shares set to mature on March 6, 2025 and two to mature on March 19, 2028. The JMMBGL7.25c and JMMBGL7.00NC are both offering interest rates of 9.9423 per cent in 2023, which is a significant increase over the 2022 rate.

While this increase in annualised payments has been beneficial to preference shareholders, it has also translated to a higher interest expense for JMMBGL. JMMBGL’s interest expense on its redeemable preference shares rose eight per cent from $1.69 billion to $1.84 billion for its 2023 financial year (FY).

During the first six months of 2023, JMMBGL’s interest expense jumped 42 per cent to $15.38 billion, a faster pace than the 18 per cent rise in interest income to $19.53 billion. The dramatic rise in interest expense can largely be attributed to its subsidiary Jamaican Money Market Brokers Limited (JMMB Investments) refinancing maturing debt during the 2023 FY from rates of 5.75 – 6.75 per cent to 7.5 – 12.30 per cent.

JMMBGL is currently planning to rebalance its balance sheet amid the repricing of its assets and liabilities. JMMBGL recently paid out a $0.25 or $488.89 dividend to its ordinary shareholders on October 9. JMMB Puesto De Bolsa S A (stock brokerage firm) in the Dominican Republic recently paid out a $389.66 million dividend, with JMMBGL collecting $311.72 million based on its 80 per cent stake.

Eppley Limited was the last firm to amend the terms of its preference share. Its 5.00 USD preference share had its maturity pushed from January 2021 to January 24, 2024, with the interest rate changed to 6.00 per cent. Eppley Limited paid $300 million on a preference share which matured in August, and is set to have a $500-million preference share mature in December 2024. Productive Business Solutions Limited’s 9.75 per cent JMD preference share is to mature in July 2024. A S Bryden Holdings Limited was the latest firm to list its 6.00 per cent USD preference share on November 10.