JMMB Group Limited (JMMBGL) has received approval to amend the terms of issue on two classes of its preference shares at its general meeting held on Wednesday at the AC Hotel.

Four classes of JMMB Group’s cumulative redeemable preference shares were set to mature on January 14, 2024, eight years after they were issued to the market at $7.09 billion. JMMB Group was able to gain 97 per cent approval from its preference shareholders for its JMMBGL7.50 and JMMBGLUSD6.00 terms to be adjusted. However, it had to adjourn the separate meetings for the JMMBGLUSD5.75 and JMMBGL7.25 preference shares due to the absence of a quorum. A quorum is simply the number of shareholders or percentage of shares which must be present at a meeting in order for it to constitutionally be deemed legal.

“As has been a customary part of our tier 2 capital management strategy, JMMBGL has historically issued new preference shares, by way of a prospectus, upon the maturity of existing preference shares. Now, with the maturity approaching of these named preference shares, we are moving to employ a more administratively efficient approach to extend the existing preference shares, instead of re-issuing, providing a win-win for all,” as seen during Group Chief Financial Officer Patrick Ellis’ presentation.

As a result of the approval, both approved preference shares will now have their terms of issue amended which includes maturity for January 14, 2030. Also, the JMMBGLUSD6.00 will now have a fixed interest rate of 8.50 per cent while the JMMBGL7.50 preference share will have a fixed interest rate of 9.50 per cent for a year before it becomes a variable rate instrument again. The reset rate will be 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. JMMBGL preference shares denominated in Jamaican dollars have their preference dividends paid monthly while the United States dollar preference shares are paid quarterly.

A preference share is usually a type of share that tends to rank above ordinary shareholders and is entitled to a guaranteed dividend payment. These shareholders usually don’t have the ability to vote at shareholder meetings but are paid before ordinary shareholders in the event of a wind-up of the company. These shares can be included in debt or equity depending on how they are structured. In JMMBGL’s case, they’re classified as liabilities.

The JMMBGLUSD6.00 per cent had a carrying value of $6.44 billion as of March 2023 while the JMMBGL7.50 preference share had a carrying value of $1.83 billion. Based on the original issue value of US$42.78 million, the new rate is set to result in an additional US$1.07 million in additional interest cost. JMMBGL7.50’s current rate is 9.30 per cent in 2023 which means that it will attract an additional 20 basis points in 2024 or $3.66 million in interest expense.

JMMB Group issued a notice to the Jamaica Stock Exchange (JSE) that they would provide a further advisory related to the two classes of preference shares whose general meeting was adjourned. The 7.25 per cent preference shares in issue are valued at $14.15 million while the 5.75 per cent preference share is valued at $48.18 million. JMMBGL can always redeem these preference shares in January 2024 and repay the principal to preference shareholders or reconvene the meeting if deemed necessary. The par/issue/maturity prices of the preference shares are JMMBGLUSD6.00 at US$1.00, JMMBGLUSD5.75 at US$1.50, JMMBGL7.50 at $1.00, and JMMBGL7.25 at $1.50. These preference shares closed Wednesday at US$1.06, US$1.80, J$1.06, J$1.89, which have increased in price following the announcement of the new terms last month.

When asked by several preference shareholders about the redemption of the preference shares by existing holders who want their cash, JMMB Group Chairman Dr Archibald Campbell noted that the company would be arranging with these clients, who were likely among those who voted against the extension, a solution to allow them to exit the investment. JMMB Group CEO Keith Duncan also added that the team would be arranging a book for clients who have an interest in increasing their interest in the preference shares while simultaneously providing the exit some desire.

JMMBGL has four classes of preference shares set to mature in March 2025 and another two classes to mature in March 2028. JMMBGL is set to release its third quarter earnings by February 14.

Eppley Limited redeemed its 5.00 per cent preference shares in August for $300 million and will be redeeming its 6.00 per cent USD preference shares on December 29, earlier than the January 24 maturity date. These preference shares are to be redeemed at US$1, well below the current trading price of US$1.4683. Eppley’s 7.50 per cent preference share is to be redeemed by December 2024 while Productive Business Solutions Limited’s 9.75 per cent preference share is to be redeemed by July 2024.