Amid the current questions surrounding Barita Investments Limited (BIL), Barita Finance Limited (BFL) and Cornerstone Financial Holdings Limited (CFHL), some companies, which are either readying to raise capital on the equity market or planning to do so in the near future, have indicated to the Jamaica Observer that they fear their offers might become hampered by the news of these companies.
With the novel coronavirus creating opportunities for companies to capitalise on undervalued assets, several have chosen the route to utilise the equity markets as their business proposition in the current environment makes them more attractive. Some companies which have raised additional capital this year include Sygnus Credit Investments Limited for US$27.1 million, Proven Investments Limited for US$30.2 million and Derrimon Trading Company Limited for JM$4.22 billion.
Future Energy Source Company Limited raised JM$240 million while Alliance Financial Services Limited’s initial public offering failed to take off. However, with the current attention focused on BIL’s multi-billion-dollar additional public offering (APO), companies have told Sunday Finance that they will be pressing for their equity raises to be processed through their legal teams much faster than normal.
There is a fear that the current attention on BIL, combined with the Finance Minister Dr Nigel Clarke’s comment in January about APO’s being marketed as candy shops, could dampen the potential investor interest as they become conservative with their capital. BIL has created a series of YouTube videos answering the relationship between itself BFL and its parent CFHL.
BFL is a St Lucian international business company which has been described as an orphan trust with no direct beneficial owner but is owned through an independent trustee. Orphan trusts act as direct pass through vehicles where no major residual assets remain at that level with proceeds flowing to the intended owner as planned.
According to a Trinidad Express article, BFL lent Cornerstone Investments Holdings Limited an unsecured loan of US JM$26.3 million in two tranches in 2019. It also mentioned a debenture in favour of BIL for an 18 month US dollar, fixed-rate, secured investment bond Series B, tranche A for JM$4 billion (US$27.5 million). BFL increased its ownership in BIL on October 14, 2020 through the purchase of shares from 294 Inc at JM$92. This was preceded by CFHL investing JM$8.96 billion in BIL’s first APO at a price of JM$52. When combined with 294 Inc and First Citizens Investment Services investments in that APO, these three investors made up 91 per cent of the JM$13.5 billion raised. CFHL is expected to inject between JM$7.57 billion and JM$11.35 billion based on its 75 per cent committed subscription. BIL is aiming to raise JM$10 million – JM$15 billion in its APO which closes September 21.
BIL’s stock price has experienced a massive rise in the last three years with the price has risen from JM$10 to its current price of JM$90.09. There is an interesting observation where BIL’s stock price has experienced sudden surges as seen between September 23 – 30, 2019, where the price rose from JM$71.60 to JM$86.46. This phenomenon was observed again between September 22 – 30, 2020, where the price ran from JM$95.87 with a peak of JM$98 on the final day. This was accompanied by substantially large volumes in the period relative to the stock price remaining flat between JM$49 and JM$55 for most of 2020.