MAYBERRY Investments Limited (MIL) is refinancing its $2-billion unsecured 6.50 per cent corporate note due in short order with a new unsecured note at a 10 per cent interest rate.

The new unsecured corporate note has an issue date of October 8, 2022 and is due in two years when the principal will be paid at maturity. Interest will be payable quarterly to investors who hold the note. Mayberry Investments last refinanced its unsecured corporate note in 2016 from the prior rate of 9.5 per cent. The Bank of Jamaica’s (BOJ) policy rate was 5.00 per cent at the end of 2016.

The notes will be issued in minimum denominations of $1 million and restricted to accredited investors as per the Financial Services Commissions’ (FSC) guidelines for exempt distributions. An accredited investor can be an individual who has earned $10 million before taxes in each of the two most recent calendar years or one who has a net worth exceeding $50 million as per the FSC’s guidelines for exempt distributions.

Mayberry’s higher rate on its unsecured note reflects the general environment of higher

interest rates as central banks continue to increase rates to deal with elevated inflation. The BOJ has increased its policy rate over the last year from 0.50 to 6.50 per cent as of September with commercial banks adjusting loans with variable rates for their clients. Mayberry Investments even increased the interest rate on its margin facility from 12 per cent to 15 per cent on July 1. A margin loan is one whereby a client borrows against the value of a financial asset held with a particular brokerage firm.

However, Mayberry Investments chief executive officer Gary Peart confirmed via e-mail with the Jamaica Observer that the note’s tenure reflects the company’s expectations that rates will trend down by time maturity happens in October 2024. While the 350 basis point spread on the new note will mean additional interest expense for the company, Peart also referenced the fact that the yield on the assets that the funds have been invested into have increased as well.

Mayberry Investment’s consolidated net interest income increased by 32 per cent to $159.14 million for the first six months of 2022 which was driven by a 26 per cent rise in interest income to $498.57 million.

When asked about subsidiary Mayberry Jamaican Equities Limited’s (MJE) $2.2 billion

secured corporate bond due in September 2023 and refinancing in the elevated interest rate environment, Peart said, “Depends on available opportunities. We don’t expect refinancing to be an issue, but MJE also has the ability to retire the debt as well.”

MIL has decreased its stake in MJE since the start of the year from 63.04 per cent to 56.71 per cent as of September which has unlocked additional capital for the brokerage company.

MJE is an investment company that owns positions in companies listed on the Jamaica Stock Exchange (JSE) with a focus on long-term capital appreciation and capital preservation.

MJE’s investment portfolio stood at $22.45 billion as of September which was above the $18.94 billion peak at the end of 2019.

MIL’s consolidated net interest income and other revenues jumped 178 per cent to $7.60 billion which was largely driven by the $6.23 billion net unrealised gain on investment in associates related to MJE’s associate stakes. While operating expenses rose 61 per cent to $1.26 billion, a large driver of this increase was due to the increased expected credit loss provision which moved from $22.24 million to $168.55 million for the period. Although staff costs grew by a third to $419.67 million, Peart added this was to boost capacity for more business. Net profit attributable to shareholders grew 102 per cent to $3.21 billion for the period up to June.

MIL’s consolidated asset base is up 36 per cent year over year to $53.56 billion with investments in associated companies at $19.01 billion and cash resources at $1.9 billion.

Total liabilities remain up 28 per cent to $24.55 billion while equity attributable to shareholders increased 17 per cent to $18.40 billion. The share price remains up two per cent year to date at $8 which gives it a market capitalisation of $9.61 billion. It’s net book value per share was $15.32 up to June.

While Peart couldn’t give a definitive update on the proposed scheme of arrangement for the Mayberry Group of companies, he did say that they are currently awaiting a date and expect one before the end of the year. Under the proposed scheme, Mayberry Group Limited, a St Lucian international business company (IBC), would become the new parent company of Mayberry Investments which would become a wholly owned subsidiary while St Lucian IBC’s Mayberry Jamaican Equities Limited and Widebase Limited would become direct subsidiaries of the Mayberry Group. Mayberry Investments and Mayberry Jamaican Equities annual general meeting (AGM) have not been held as yet since they are currently waiting on a date to include resolutions on the reorganisation. MIL’s AGM was last held on October 28 while MJE’s AGM was last held on June 30.