Cornerstone looks to regional expansion
CORNERSTONE Financial Holdings Limited (CFHL), the parent company of Barita Investments, is now plotting an aggressive expansion plan into the wider Caribbean, in the aftermath of securing a strong credit rating from the Trinidad-based Caribbean Information and Credit Rating Services (CariCRIS). CariCRIS gave Cornerstone Financial Holdings Limited an investment grade rating, putting the seven-year-old company above some of its older more established peers.
Paul Simpson, CEO of the Cornerstone Group, said the rating was sought as part of efforts to bring Caribbean-wide awareness to the company.
“A lot of people do not know Cornerstone [and so] we wanted an independent assessment that Caribbean investors could trust to give us a rating,” Simpson told the Jamaica Observer. He said the strong positive rating will “bring some legitimacy to the company in the eyes of investors” and help the company to tap funders outside of Jamaica.
CariCRIS assigned CFHL an initial corporate credit rating of jmA (Local Currency Rating) and jmA- (Foreign Currency Rating) on the Jamaica national scale and CariBBB+ (Local Currency Rating) and CariBBB (Foreign Currency Rating) on the regional rating scale. The ratings, which were assigned with a stable outlook, are all comfortably above the minimum investment grade rating of CariBBB-. CariCRIS also outlined that among the factors supporting the ratings was CFHL’s majority ownership of Barita Investments Limited, one of Jamaica’s oldest and most established securities dealers.
Now with the rating secured, Simpson said the plan is to start expanding the business outside of Jamaica. He said Cornerstone Financial Holdings Limited which was incorporated in 2017, had plans in 2020 to expand into the region, but pulled back after being “a pen stroke away” from signing to complete the dream. He did not say in which countries or which area CFHL was expanding then, but said now he has identified “solid investments to pursue”.
“We are definitely looking at the energy generation sector and the banking sector. Those two sectors are important to us. We are going to try to play our part in reducing energy poverty and playing our part in giving expanded banking to the underserved,” he told the Business Observer.
He continued: “We planned in 2022 to expand our business and we pulled back. That [expansion] would have carried us into about three or four Caribbean islands but we pulled back, and this time we [are] moving full speed ahead. We have identified the target and we identified how we are going to acquire the target and that’s on the banking sector. On the energy sector, we have identified the best practices outside the Caribbean that will help us to bring energy poverty to an end.”
Simpson declined to say which commercial bank CFHL is going after at the moment, but hinted that some acquisitions are close to being completed. He also declined to say if Cornerstone will expand its merchant bank. He however indicated that Cornerstone, in the past, applied for a commercial banking licence in Jamaica to convert its merchant bank into a commercial bank, but that lengthy process acted against its plans then. He said then, the company secured funding from the Overseas Private Investments Corporation (OPIC), to help fund its commercial banking ambitions. OPIC is the US Government’s development finance institution which targets private sector funding. It was merged four years ago with other entities and renamed the United State International Development Finance Corporation (DFC). Just last week, its executives met with the CEO of the DFC, Scott Nathan at the US Embassy in Kingston to seek further funding for its projects.
Ahead of those plans though, CFHL is undergoing a management shake-up which the company said is to help it focus on its growth objectives. The company last week filed documents in the Supreme Court to initiate the process of reorganisation of the Cornerstone Group via a scheme of arrangement in accordance with the Banking Services Act. According to chairman of Cornerstone, Mark Myers, “This action was always intended by our group so as to ensure consolidation of the ownership of our operating financial entities under one financial holding company. Consequent to the reorganisation which will facilitate further integration of various functions across the operating businesses of Cornerstone, the group will realise operating efficiencies and synergies over the near to medium term.”
In February of 2022 Cornerstone submitted a financial holding company application and restructuring business case to the Bank of Jamaica (BOJ) for consideration. With the BOJ on March 10, 2023 having issued its non-objection to the reorganisation of the Cornerstone Group, the court filing by Cornerstone marks the first step towards implementation of the consolidated corporate structure.
Sources have revealed that the group is in the process of acquiring expanded skillsets and realising opportunities for greater efficiencies in preparation for the roll out of the consolidated structure. So far, CFHL is reorganising itself ahead of full approval from the BOJ for its new financial holding company (FHC). The structure as proposed is for that FHC to be owned by CFHL. Barita Investments and any other financial entities to be acquired by CFHL, will come under the direct auspices of the FHC which will be headed by Dane Brodber, who is now the interim CEO of Barita Investments Limited. Come January, Ramon Small-Ferguson will assume the role of CEO of Barita Investments which will be de-listed from the Jamaica Stock Exchange and replaced by the FHC.
Other movements include Percival Hurditt who is the former deputy head for credit at the National Commercial Bank (NCB) who will become the chief operating officer of the FHC. Geoffrey Roman, senior vice-president for risk at Barita Investments will become head of risk for the Cornerstone Group, while Stephen Phillibert will remain as CFO. Gavin Gordan will move from the COO role in Jamaica to the CEO of the fintech in Florida. The head of legal Malindo Wallace will remain in that role while her second in command Stephanie Sterling will be promoted to SVP in legal. Damion Brown will concentrate strictly on the real estate strategy as Cornerstone looks to build its properties around Jamaica. Paul Simpson and Jason Chambers will remain at the ultimate holding company.
We understand also that Cornerstone United Holdings Jamaica (CUHL) will be merged with CFHL to become a single entity.
“All this reorganisation is to prepare us to make an aquisition,” Simpson said while remaining tight-lipped on the target. He pointed to the proposed acquisition in 2020 which fell through, but said a deal was inked earlier this year. When pressed about the deal, Simpson said “there is many a slip between cup and lip”, adding that he would prefer to speak more about it “after the sellers make their own announcement”.
When further pressed about the size of the aquisition, Simpson only said it’s “bigger than what we have now with Barita” and “would prefer the other party we are purchasing from to break the news”.
CFHL and CUHJ, alongside its subsidiaries, are collectively referred to as the Cornerstone Group of Companies (the Group). The principal activity of CFHL involves the holding and trading of equity securities derived from its two subsidiaries, namely, Barita Investments Limited (BIL) and Cornerstone Financial Holdings Limited USA Incorporated (CFHL USA). In August 2018, the company became the majority shareholder of BIL, owning 74.5 per cent of its total shareholdings, and is the sole shareholder of CFHL USA as at September 2022.