Financial conglo-merate JMMB Group Limited plans to increase the yield on two expiring preference shares, pending shareholder approval to extend their maturity dates.
“The pricing of the Jamaica dollar preference share was designed to ensure that investors maintain a return that would be higher than 6.0 per cent, which is the targeted inflation rate by the Monetary Policy Committee of the Bank of Jamaica,” JMMB Group commented. The inflation target range is 4 to 6 per cent, and headline inflation is currently tracking within target at 5.0 per cent.
The two preference shares offer existing rates of 5.75 per cent in US currency, and 7.25 per cent in Jamaican currency. They both mature in March, but JMMB Group wants shareholder approval to extend these preference shares to March 2031 and 2032, respectively.
The new coupon rates proposed by JMMB Group are 7.5 per cent for the US dollar prefs, and 10 per cent as a base rate on local currency preference share, with a premium added based on Treasury bill movements.
The extended prefs would be at higher yields at a time when the market is entering a new stage of slightly lowered interest rates amid the adjustment of the benchmark, or policy rate, set by the central bank.
The Bank of Jamaica has cut rates several times since last year, from 7.0 per cent to 6.0 per cent. Its next rate decision is due for release on February 20.
“Noting the potential future impact on the return to investors, a floor of 6.0 per cent has been put in place to ensure investors have the certainty of a minimum return,” JMMB Group said regarding the prefs it proposes to extend.
Shareholders will vote on whether to vary the existing terms of two preference shares on March 3.
“As has been a customary part of JMMB Group’s Tier 2 capital management strategy, the group has historically issued new preference shares, by way of a prospectus, upon the maturity of existing preference shares,” the company said.
Preference shares are debt instruments that are shared among investors and offered at specific interest rates. They are separate from ordinary shares, which gives investors an ownership stake in a company.
JMMB Group currently has one class of ordinary shares, and eight classes of preference shares trading on the stock market, two of which will be redeemed on March 6 and delisted.
Extending the terms of some existing shares will obviate the “time-consuming and administratively inefficient process” of issuing new preference shares, JMMB Group said.
“Issuing new shares requires investors to go through the often-arduous task of completing and submitting the requisite application forms and supporting documentation, to apply for new shares. Simply voting for an extension of the existing terms both eliminates that need, all while empowering preference shareholders to receive competitive returns on their investment,” the financial conglomerate said.
JMMB Group previously extended other preference shares in 2023 – a 7.5 per cent Jamaican dollar issue and a 6.0 per cent US dollar issue – which were set to mature on January 14, 2024.
At last disclosure, the value of the JMMB Group preference shares totalled $29 billion.
