Sygnus Capital Limited on Wednesday said that it recently closed a $1.1-billion investment-grade rated bond for Mystic Mountain Limited.
The bond, which was significantly oversubscribed, has a coupon of 7.125 per cent and a tenure of seven years, and was rated ' jmA-' with a stable outlook by Caribbean Information and Credit Rating Services Limited (CariCRIS), the financial house advised.
Sygnus issued the update in a news release in response to this week's Business Observer story which reported that the bond would be issued.
Mystic Mountain, an ecotourism adventure park, is the first non-financial corporate entity to issue a rated bond in Jamaica. According to CariCRIS, the rating is supported by the company's strong brand equity, ideal location and its unique attractions, which contribute to a solid market position and high customer demand.
“Furthermore, increased activity in Jamaica's tourism industry has positioned Mystic Mountain to benefit from strong growth prospects,” CariCRIS added. “The ratings are also supported by the company's high asset quality, driven by stringent preventative maintenance, and a good track record of financial performance.”
The news release quoted Gregory Samuels, Sygnus' executive director and head of corporate advisory, as saying that the financial house was “very pleased to help develop our local capital markets by bringing a rated instrument to investors”.
“Issuers like Mystic Mountain, who decide to get their debt rated, are able to get much better pricing compared to similar unrated bonds and stand to save anywhere between 100 bps and 300 bps, depending on the rating. In addition, getting your bond rated gives greater access to a wider investor pool, such as pension funds, that are not allowed to invest in non-rated unsecured bonds,” Samuels said.
The proceeds of the bond will be used to enhance and expand the park, as well as refinance the 10.75 per cent unrated bond that was issued two years ago, Sygnus explained. Mystic Mountain hopes to enhance the visitor experience and double the park's capacity by upgrading its current facilities, building sea-view cabanas and introducing three new rides: a Rollerglider, which is a hybrid zip line with characteristics similar to the bobsled ride; a ropes obstacle course; and a climbing wall.
“I encourage more issuers to go the route of getting their bond rated. It not only garners a better price, but also gives investors added comfort, transparency, and confidence in the calculated risk that they are taking because the risk assessment is done by a reputable, independent and unbiased third party,” Samuels said.
“I believe more firms are not getting their bonds rated because one, they are not aware of the significant benefits that can be derived by such a lower coupon; two, they are not aware that the cost of getting a rating is minimal, in some instances less than 10 bps of the issue size; and three, that there is a short timeline for the rating process, which usually only takes between two and three weeks. At Sygnus, we feel so passionate about this process that we are prepared to absorb a portion of the rating cost for our issuing clients,” Samuels added.