JMMB Group Limited (JMMBGL) will approach preference shareholders within the coming weeks to seek a six-year extension on two classes of preference shares which are set to mature next month.

JMMBGL published a notice on Monday that it would be seeking to extend the tenure of JMMBGL7.25C and JMMBGL5.75C by an extra 72 months, or six years, while it would be redeeming JMMBGL7.00NC and JMMBGL5.50NC on March 6. The details such as the date, location, and time for the two general meetings will be communicated in short order. The proposed extension emanates from a board decision on January 30.

JMMBGL originally raised $9.28 billion ($9.13 billion net as per 2018 audited financials) in March 2018 by issuing four tranches of preference shares. JMMBGL7.25C had a carrying value of $3.697 billion; JMMBGL5.75C had a carrying value of US$42.53 million ($5.33 billion); JMMBGL7.00NC had a carrying value of $64.35 million; and JMMBGL5.50NC had a carrying value of US$310,000 ($38.85 million). The Jamaican-dollar (JMD) preference shares were issued at $2 per share while the United States-dollar (USD) preference shares were issued at US$2 per share.

At the end of March 2024, JMMBGL5.75C had a carrying value of $6.55 billion while JMMBGL5.50NC had a carrying value of $47.71 million, which is due to the depreciation of the JMD against the USD.

JMMB Group is proposing to change the fixed interest rate offered on JMMBGL5.75C from 5.75 per cent per annum to 7.50 per cent per annum, a 175-basis point (1.75 per cent) increase. With respect to JMMBGL7.25C, JMMB Group wants to set a fixed rate of 10.00 per cent between March 2025 – March 2026 before the preference share becomes a variable rate instrument again. The preference share would reset every March 6 with a new reset rate, which would be calculated as 250 basis points (2.50 per cent) plus the GOJ’s (Government of Jamaica) 180-day weighted average treasury bill yield (WATBY), subject to a floor of 6.00 per cent, which means that the reset rate can never go below that rate.

The proposed extension would result in JMMB Group paying an extra US$744,275 ($116.87 million) in preference share dividends to the owners of JMMBGL5.75C. JMMB Group’s 7.25 per cent preference share had a 3.46 per cent rate in 2021, 5.62 per cent rate in 2022, 9.94 per cent rate in 2023, and 9.61 per cent rate in 2024. This is based on a formula of the GOJ 180-day WATBY plus 150 basis points (1.50 per cent).

The first year under the fixed 10 per cent interest rate would result in preference shareholders receiving an extra $14.42 million in preference share dividends. Afterwards, the expected reduction in the GOJ Treasury Bill yields would result in JMMB Group paying less in preference share dividends on JMMBGL7.25C. JMMBGL preference shares denominated in JMD have their preference dividends paid monthly while the USD preference shares pay preference dividends quarterly. The preference dividends are tax-deductible for JMMB Group, which means there is no withholding tax applied on payment to owners of the shares.

JMMBGL7.00NC closed Monday at $2.30, which is a premium to its maturity price. JMMBGL7.25C closed at $1.82; JMMBGL5.50NC closed at US$1.7424; and JMMBGL5.75C closed at US$1.85. These three preference shares are all trading below their maturity price. February 20 is the record date for all four of these preference shares which have a payment date of March 6. JMMB Group will publish its third-quarter results by February 14.

This would be the second preference share extension JMMB Group would execute in over a year. JMMB Group approached preference shareholders to get an extension on the maturity date on all four of its preference shares by six years at the time. However, at the December 2023 general meeting, two of the preference shares — JMMBGLUSD5.75 and JMMBGL7.25 — did not have a quorum for a meeting to be held. As a result, those preference shares matured in January 2024 with JMMB Group paying out about $62.33 million.

JMMB Group was able to extend the maturity dates of the other two preference shares to January 2030, with JMMBGLUSD6.00 being adjusted from 6.00 per cent to 8.50 per cent while JMMBGL7.50 became JMMBGL9.50. The terms on JMMBGL9.50 was that it would be fixed at 9.50 per cent from January 2024 – January 2025 before it began to float again with a reset rate. That reset rate is the same as the proposed terms for JMMBGL7.25C. JMMBGL9.50’s rate should be reset to 8.56 per cent, based on the recent GOJ Treasury Bill results. The 6.00 per cent floor was stated to ensure that the preference share didn’t go below Bank of Jamaica’s (BOJ) upper range for its inflation target.

Eppley Limited’s preference share matured on December 6, with the company paying out $500 million. Sygnus Credit Investments Limited has two preference shares maturing in December, with the class C preference share maturing at $100 with a $1.6-billion face value while the class D preference share matures at US$10 with a US$16.78-million face value.