Barita Investments' bond offer will feature seven tranches. (Photo: David Rose)
Barita seeks $6.2 billion in public bond offer
As part of its push to further grow its core business, Barita Investments Limited will be seeking to raise an estimated $6.15 billion in a senior unsecured public bond offer which will be open for two months and feature seven tranches.
The company is seeking to raise US$11 million ($1.71 billion) between two tranches (US$5.5 million each) with the option to upsize those tranches to a total of US$17 million ($2.65 billion). Barita is also seeking to raise $2.25 billion across five tranches ($450 million each) with the option to upsize the offer to a total of $3.50 billion.
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The offer officially opens on March 28 and is scheduled to close by May 26.
Barita intends to use US$2.20 million and $393.17 million to fund a strategic asset acquisition, US$2.20 million and $393.17 million to support the trading of investment securities, US$4.40 million and $786.34 million to strengthen its overall liquidity or available funding, US$2.20 million and $393.17 million to improve its investment banking capacity for deal execution, and $84.15 million to refinance tranche I of its unsecured fixed rate bonds issued in March 2023.
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Transaction costs that will be incurred for the offer are estimated at $200 million.
“This bond offering is designed to position Barita to capitalise on high-potential opportunities both domestically and internationally, while effectively adding capacity to our balance sheet. This risk-measured strategy is aimed at delivering sustained shareholder value while ensuring resilience against potential economic fluctuations. As we move forward, Barita remains committed to excellence, innovation, and sound financial stewardship, ensuring long-term success for our clients and stakeholders alike.
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“We are therefore pleased to extend this invitation to participate in Barita’s continued growth journey,” stated Barita Chairman Mark Myers in his letter to prospective investors.
Tranche I will offer a 7.00 per cent United States dollar (USD) interest rate for two years, while tranche II will offer a 7.50 per cent USD interest rate for three years. Tranche III will offer a 9.75 per cent interest rate for two years, tranche IV will offer a 10.00 per cent interest rate for three years, tranche V will offer a 10.50 per cent interest rate for five years, tranche VI will offer a 10.75 per cent interest rate for seven years, and tranche VII will offer a 10.90 per cent interest rate for 10 years.
If anyone applies for either USD tranches of the bond they will be required to apply for a minimum of US$500 worth and would have to apply in US$50 increments for higher amounts. The Jamaican dollar tranches require applicants to subscribe to a minimum of $50,000 worth of the tranche with $1,000 increments for higher amounts.
This is Barita’s second major debt offering and latest major capital markets offering in the last six years. The entity had sought to raise an $8-billion bond in a private placement with an option to upsize to $11.04 billion in February 2023, but only ended up raising $3.82 billion by August 2023.
Barita turned to a USD margin loan facility, which had a balance of $4.21 billion in September 2023 and increased to $8.32 billion in September 2024. That debt facility was priced at the United States Federal Reserve rate plus 100 basis points (1.00 per cent).
In prior years Barita had relied on equity raises which garnered support largely from its parent company Cornerstone Financial Holdings Limited, but also from the wider public which included strategic investors like Trinidadian broker First Citizens Investment Services Limited. Barita raised a gross amount of $10.78 billion in September 2021, $13.50 billion in September 2020, $5.26 billion in September 2019, and $4.07 billion in March 2019. That combination of fresh equity and growing repurchase agreement liabilities resulted in Barita’s consolidated asset base of $18.88 billion and shareholders’ equity/capital base of $3.07 billion in September 2018 rising to $142.32 billion and $35.30 billion, respectively, in September 2024. That growth in its business also saw its net operating revenue move from $1.30 billion to $10 billion over the same time frame while consolidated net profit grew from $363.24 million to $3.82 billion.
With its plans set firmly on expansion, Barita received an initial credit rating from the Caribbean Information & Credit Rating Services Limited (Caricris) on December 5. It was assigned a jmA+ (good) on the local currency rating and jmA on the foreign currency rating.
“The increase in funding has supported the company’s strategy to grow and diversify its investment portfolio. As at September 2024 the funding base comprised mainly of repos (82.5 per cent) which were significantly skewed towards higher rate-sensitive short-term repos, a characteristic of the securities dealers’ industry in Jamaica,” stated the Caricris report.
It also stated: “Over the coming years, Barita will endeavour to further diversify its funding base to reduce the risk of short-term maturity mismatches. Additionally, by forging new relationships with overseas brokers over the medium-term, the company’s liquidity is expected to remain stable.”
Barita has been pushing to grow its alternative investment portfolio over the last four years, which includes private credit/equity, real estate and other high-potential asset classes. This has resulted in Barita largely booking unrealised gains on real estate valuations and realised gains on private equity and private credit investments. The company noted in its first quarter report that its real estate strategy is now in the development stage and that it anticipates a shift in portfolio returns to realised gains.
Barita’s consolidated net interest income grew 15 per cent to $169.18 million due to a three per cent cut in interest expense to $1.69 billion. Its overall net operating revenue improved by nine per cent to $1.44 billion largely due to higher fees and commission income. Operating expenses rose 10 per cent to $761.60 million due to a rise in administrative costs. Consolidated net profit grew 15 per cent to $551.21 million.
Barita’s total assets stood at $139.60 billion with $91.81 billion of pledged assets, $25.92 billion in investment securities, and $1.08 billion at the end of December 2024. Total liabilities were $104.15 billion with $84.91 billion in repos and shareholders’ equity at $35.45 billion. It is expected to publish its 2024 annual report by March 31 after it was originally due on January 28.
Also, Barita is set to become a subsidiary of Barita Financial Group Limited following the recent scheme of arrangement.
Whilst Barita’s offer will be open for two months it might have to compete with other fixed income offers in the marketplace. NCB Financial Group Limited (NCBFG), parent company of NCB Jamaica and Guardian Holdings, is refinancing Jamaican dollar debt with a 10.00 per cent bond on a 2.5-year tenure and a 10.50 per cent bond on a 5-year tenure which is set to close on March 26.
NCBFG is also refinancing USD debt with an 8.00 per cent bond on a 2-year tenure, an 8.25 per cent bond on a 3-year tenure, and an 8.50 per cent bond on a 5-year tenure.
This USD bond offer closes on March 31.
The local bond has a minimum subscription of $100,000, while the USD bond has a minimum subscription of US$10,000.
Barita intends to apply to have the different tranches of the bond listed on the Jamaica Stock Exchange (JSE) Bond Market and JSE USD Bond Market. There are currently five securities listed on the JSE Bond Market with all of them being subsidiaries of Mayberry Group Limited, while there is only Express Catering Limited’s bond listed on the USD Bond Market.
However, it should be noted that VM Investments Limited, which closed their $5.43-billion public bond has yet to list their bond on the JSE Bond Market. This public bond offering closed on January 10 with their basis of allotment being published on February 18.
Dolla Financial Limited’s bond which closed in December has yet to list on this market despite the term sheet noting the intention to apply on the JSE Bond Market.
Mayberry Investment Limited’s (MIL) 10.75 per cent bond which closed on September 10 was listed on November 6. Mayberry Jamaican Equities Limited’s bond offer which closed on June 19 was listed on July 30. Even MIL’s January 2023 bond was listed in March 2023. MIL’s recent 10.25 per cent bond closed on February 27 with the basis of allotment published on March 20.
