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Published:Tuesday | August 30, 2016 | 12:00 AM
ISP Finance Services Limited will seek to raise $150 million from a corporate bond to be floated this week.
The microfinancing company, which went public five months ago, plans to list the three-year bond on the Jamaica Stock Exchange (JSE). The offer arranged by VM Wealth Management will be on the market initially for three weeks, September 1-22, with an option to extend the subscription period.
The bond is priced at 10 per cent. It will mature in 2019.
"The company intends to use the proceeds to expand its loan portfolio and for working capital and general corporate purposes," said chief executive officer Dennis Smith in the prospectus.
ISP argues that the improvement to its balance sheet allows it to adequately support the offer.
A large part of those improvements relate to what the company called its capital reorganisation plan in which the founders of the company acquired shares to set off loans they used to fund much of the company operations. The prospectus for the bond float did not precisely disclose the names of those co-founders except for Smith.
"The company's founders funded much of the company's business operations through loans to the company.
In the first quarter of 2016, the company implemented a capital reorganisation, involving the founders subscribing for shares in the company and using the loans they were owed by the company to set off against the subscription price for the shares," stated the prospectus, which lists Smith as a co-founder holding 3.5 million shares directly and 56 million through connected parties.
Non-executive director Robert Chung (not listed as a co-founder) is linked to 45.9 million shares through a connected party.
The capital reorganisation reduced ISP Finance's overall indebtedness from $328 million at December 2015 to around $127 million at June 2016.
VARIED FUNDING OPTIONS
ISP started in 2007 as a provider of short-term loans to security guards, then expanded to include other workers. The loans mainly finance personal expenses such as utility bills, school fees, home repairs, auto insurance, as well as family emergencies such as funeral expenses and medical costs. The company also provides a variety of funding options
for self-employed and small
manufacturers.
The company listed on the junior market of the JSE in March after its initial public offering, which raised $98 million.
In the quarter ending June, ISP made $11.7 million net profit on revenues of $52.1 million, or 244 per cent higher profit year on year.
The company's loan portfolio ticked up by less than a million dollars to $304.7 million in six months. The company has a capital base of $192.5 million, while its total assets amount $332.3 million.
ISP said in its prospectus that it intends to expand its reach geographically to areas with a concentration of employed individuals and small and medium-size businesses, and to deepen its penetration of the loans market among public sector workers and SME workforces.