GWest, JSE stand their ground on stock transaction

GWest Corporation, a health-care company that listed on the market last December, insists that it properly disclosed a transaction used to swap out some of its debt for preference shares issued to shareholders, an assertion that has been endorsed by the Jamaica Stock Exchange, JSE.

This comes in the wake of allegations by ICInsider.com, the financial website operated by John Jackson.

The transaction converted $250 million of debt owed to shareholders. A market notice published September 21 on the Jamaica Stock Exchange said the loans were replaced with one million 10% cumulative non-redeemable preference shares, each allotted at a price of $250.

Asked to comment on the allegations, the GWest Board of Directors, led by Chairman Dr Konrad Kirlew, issued a statement to the Financial Gleaner saying Sections 18 and 19 in the November 2017 GWest prospectus for its initial public offering of shares on the stock market "specifically disclosed that shareholders loans were to be converted to preference shares, thereby reducing the servicing cost to the company" and that the allegations were therefore "unfounded and without merit".

GWest became the 34th company to list on the junior arm of the exchange last December. Note 18 of its prospectus says: "50% of shareholders' loan will be converted to non-redeemable preference shares with interest at 10% per annum. The remaining 50% will remain as shareholder loan with no fixed repayment with interest at 10% per annum for the J$ amounts and 4% per annum for the US$ amounts."

Jackson is holding firm to his position that the salient and fundamental sections of the prospectus listing GWest's contractual obligations and speaking to changes in share capital of company do not contain the intention or resolution passed to covert loans to preference shares.

He contends that the financial projections do not form the crux of the prospectus.

"The audited accounts don't make any reference to that agreement, the annual report that they put out don't make any reference to it, and in the interim report they put out, it just suddenly shows up and there is no explanation to how it came about. You don't see how the share capital has been changed to facilitate the issue of the preference shares," Jackson said last night.

JSE Managing Director Marlene Street Forrest, to whom the Financial Gleaner reached out for comment, said in relation to this matter that there has been no breach of the JSE's rules.

"GWest was not required to send us a resolution which was passed prior to listing and which was disclosed in their prospectus. Given that these non-redeemable preference shares were duly authorised, they could be issued by the company pursuant to the approved resolution. These preference shares are not convertible preference shares so there is no concern about dilution of shareholders value," she said.

Street Forrest also told the Financial Gleaner that it is the JSE's practice to investigate all allegations, whether they come to the attention of the JSE as official complaints or media reports, but that no formal complaint had been lodged with the JSE over the matter.

Still, the JSE's Regulatory and Market Oversight Division is in discussions with GWest regarding the allegations, said the JSE boss, who noted that the exchange was satisfied with the responses from the health services provider.

"The company has and will be providing further information to the market. We continue to work with all companies so that as much information is available to the market and as such we continue to dialogue with GWest," she added.

Referencing the ICInsider articles published earlier this month, GWest said the writer ought to have undertaken greater due diligence to determine the facts before publishing, it charges, "false and misleading material that could be injurious to the company" at a time when it is pursuing programmes to stabilise its operations.

huntley.medley@gleanerjm.com