Monday 10 December, 2018

After raising $8b, Cornerstone looks to expand portfolio companies

“Cornerstone will use the funds raised to expand its subsidiaries’ capacity to compete through various channels,” said the company’s founder Paul Simpson.

“Cornerstone will use the funds raised to expand its subsidiaries’ capacity to compete through various channels,” said the company’s founder Paul Simpson.

Cornerstone United Holdings Jamaica (CUHJ) is now poised to expand its portfolio companies Barita Investments and MF&G Merchant Bank after raising $8 billion in the local capital market.

It raised $5 billion through a bond issue organised by Sagicor Investments Limited and an additional $3 billion from existing shareholders.

“Cornerstone will use the funds raised to expand its subsidiaries’ capacity to compete through various channels,” said the company’s founder Paul Simpson.

CUHJ is a special-purpose vehicle that acquired a majority stake in the merchant banking outfit MF&G Trust and Finance Limited in 2016. Its principal purpose is maximizing shareholder value through investing in undervalued companies in high growth industries via mergers and acquisitions, optimizing the capital structure of portfolio companies, and aggressively growing the market share of its subsidiaries.

CUHJ also comprises the same shareholders of Cornerstone Investments, which acquired Barita in August. Funds from the bond issue will also be used to refinance an earlier loan with Sagicor to partially finance the Barita acquisition.

“The efficient turnaround was in my mind. Our initial target was $4 billion but we decided to do $5 billion due to indications from the market and liquidity availability,” Simpson said regarding the bond issue.

“We believed we had a strong value proposition and a strong growth story,” he added.

The tenure of the $5 billion bond is five years with a coupon rate of 7.25 per cent, secured by Barita shares in Cornerstone Investment and approximately US $13 million in cash, Simpson revealed. 

Simpson noted that the process of securing the funds from Sagicor was made more challenging as various other bonds from more known and established entities were being floated with higher if not similar rates of returns. 

Commenting on the deal, Sagicor Investments CEO Kevin Donaldson said Sagicor believes in diverse financial institutions like Cornerstone.

 “We are supporting these initiatives because we believe it will encourage growth in the country, it will benefit us and all financial institutions in the long run,” Donaldson said.

What is more, Sagicor Investments has taken a 4.5 per cent stake in Cornerstone.

“As we continue to build capacity in or financial industry and other industries, whether through mergers and acquisitions; financing or expansion internationally, it will result in economic growth and therefore our population will be more affluent and there will be more persons who are able to invest,” Donaldson said.

 

 

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