JAMAICA: PBS avoids breach of loan covenant after agreement with bondholders - EntornoInteligente

Jamaica Gleaner / Productive Business Solutions Limited, a newly listed company ultimately controlled by the Musson Jamaica group, avoided a technical breach of its loan covenant with bondholders through an agreement to exclude preference shares from debt computations, according to a disclosure in its 2017 audited accounts.

A breach of the covenant might have triggered repayment of bond debt within a year, totalling nearly US$49 million on PBS’ books.

However, the document company received a waiver from JCSD Trustee Services Limited on behalf of bondholders last year that was finalised in an amendment on March 28 – three months past its financial year end – allowing the exclusion of US$19.7 million of redeemable preference shares in the computation of PBS’ financial covenants. The audited accounts were subsequently published on the Jamaica Stock Exchange on April 1. JSE Group is the ultimate parent of JCSD Trustee Services.

The shares, priced in Jamaican dollars and bearing a coupon of 9.75 per cent, were issued last July under PBS’ initial public offering of both ordinary and preference shares in Jamaica and Barbados.

PBS Chairman Paul B. Scott and JCSD Trustee have not responded to requests for comment. However, a source familiar with the discussions told the Financial Gleaner that the issue involved a technicality that was easily addressed. The person said that the bondholders readily agreed to the proposal because they knew their payments would be given priority over preference shareholders.

Accounting firm PwC Barbados, which audited PBS, indicated that without the debt “waiver”, the document company would have breached key ratios.

The original loan agreement with bondholders imposed covenants related to PBS’ current ratio, interest coverage ratio and net total debt-to-EBITDA ratio. The group failed to meet the EBITDA ratio last year, after issuing the 25.8 million preference shares.

“A waiver was received prior to the year end from the JCSD Trustee Services Limited on behalf of bondholders and, as such, the loan has not been reclassified to current liabilities,” stated the company.

The long-term loan represents monies raised by a private bond offering – a five-year tenure maturing in April 2021. It pays interest at 7.7 per cent to 7.75 per cent per annum. The outstanding debt on the bond is just shy of US$49 million.

PBS, a Barbados-registered interna-tional business company, is the regional dealer for Xerox. Its direct parent is Facey Group Limited, which holds 68 per cent interest. Facey Group is owned by Musson Jamaica.

At year end December 2017, PBS reported total long-term borrowings of US$69.9 million, up from US$47.9 million a year earlier, while its capital base expanded from US$30 million to US$38 million.

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JAMAICA: PBS avoids breach of loan covenant after agreement with bondholders

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