Sagicor Bank triples capital base on RBC purchase

Sagicor Bank Jamaica (SBJ) nearly tripled its capital base with the acquisition of RBC Bank Jamaica.

The commercial bank — now the third largest in the country by assets — had $13 billion in equity at the end of June, according to latest Bank of Jamaica (BOJ) data. The capital base stood at $4.8 billion three months prior.

CIBC FirstCaribbean International Bank (Jamaica) had $970 million more equity than SBJ as at June 30, but Sagicor’s commercial bank jumped from sixth to fourth in terms of equity.

However, SBJ had $15 billion more assets and $19 billion more customer deposits that CIBC’s Jamaican operations.

National Commercial Bank of Jamaica (NCB) leads the market in terms of assets, capital and loan portfolio, followed by Bank of Nova Scotia for all three measures.

The latest central bank data lumped SBJ with a deficit of $8.9 billion for the prior year. It was based on the difference of RBC’s $10.2 billion deficit and SBJ’s earning at $1.2 billion as at March 2014.

Sagicor did not respond to Observer queries on the reported deficit up to print time, but the unappropriated profits for the year to June 30 stood at $1.8 billion.

In June, Sagicor Group Jamaica (SGJ) President Richard Byles told shareholders that the full integration of RBC Bank Jamaica and SBJ would take about two years. He added that the acquisition would capture the “imagination” of executives over the period.

SBJ’s deposits stood at some $55 billion as at June 30, up from $14.7 billion three months earlier in March 2014– the acquisition added $38.9 billion in deposits from RBC while an additional $1.5 billion was added independent of the acquisition.

Sagicor announced in January that it would acquire RBC bank for $9 billion which closely reflected the book value of the Jamaica operations.

Royal Bank of Canada stated that it would take a CAD$60 million ($5.9 billion) loss on the sale of its Jamaican operations to SGJ.

It later upgraded that loss to CAD$100 million in total.

The local RBC operations recorded over $9 billion in losses over the past four-and-a- half years mainly due to bad debts.

The lack of profitability prompted RBC Jamaica‘s parent to inject close to $5 billion into it in exchange for new ordinary and preference shares since December 2011.

The commercial bank since last May closed four of its branches, leaving 13 open, and cut its workforce by 10 per cent.

SGJ ended its financial year with $6.29 billion net profit with equity of $35.9 billion. Its the 14th straight year of improved profits.

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Sagicor Bank triples capital base on RBC purchase

Mystery surrounds “meteorite” impact near Nicaraguan capital

File photo

MANAGUA, Nicaragua, Friday September 12, 2014 – Just before midnight local time on Saturday, residents of Nicaragua’s capital Managua reported hearing a loud explosion and feeling a shockwave accompanied by a burning smell.

A crater 12 metres wide and more than 5 metres deep was subsequently discovered near Managua’s international airport, and the area was cordoned off by soldiers.

Wilfried Strauch, an adviser to Nicaragua’s Institute of Earth Studies (Ineter), later said he was convinced that the crater was caused by a meteorite.

This view was supported by Ineter scientist Jose Millan, who insisted that “all the evidence that we’ve confirmed at the site corresponds exactly with a meteorite and not with any other type of event.

“We have the seismic register which coincides with the time of impact, and the typical characteristic that it produces a cone in the place of impact,” he added.

Government spokeswoman and First Lady Rosario Murillo expanded on the theory, saying that the crater was caused by a “relatively small meteorite that appears to have come off an asteroid that was passing close to Earth”.

NASA asteroid expert Don Yeomans nevertheless shot this explanation down in flames, saying that the impact felt in Managua “was separated by 13 hours from the close Earth approach of [asteroid] 2014 RC, so the explosion and the asteroid are unrelated.”

Also casting doubt on the meteorite theory was head of NASA’s Meteoroid Environment Office Bill Cooke, who insisted that “for something to produce a hole in the ground that big, it would have generated a very bright fireball, and nothing was reported”.

In his blog on the NASA website, Cooke estimated that the crater would have been created by a blast of “roughly the energy equivalent of 1 tonne of TNT” and that a meteor capable of such force would have created a fireball visible over a wide area.

Jaime Incer, a scientist who advises the Nicaraguan presidency on environmental matters, countered that it was possible nobody was looking up at the sky when the event took place close to midnight.

Lending weight to the NASA scientists’ doubts is the absence of meteorite fragments in or near the crater.

NASA’s Cooke said there could be any number of explanations, ranging from ordinance to “someone out blowing things up.”

Nicaraguan officials indicated that they would invite international experts to investigate further.

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Mystery surrounds “meteorite” impact near Nicaraguan capital

First Heritage Credit Union to establish venture capital fund

First Heritage Co-operative Credit Union (FHC) has announced that it plans to launch a Venture Capital Fund early next year.       
Making the announcement on Monday, Basil Naar, Chief  Executive Officer of FHC, disclosed that a portion of the credit union’s net surplus will be used to set up the Fund.  
FHC will invest in micro and small businesses with growth potential, he explained, adding that it will provide selected businesses with capital and, in turn, seek equity in the enterprises.   
Mr. Naar said FHC will protect its financial interest through continuous reviews of  the companies’ financial reports, while maintaining a presence on the boards of  the organizations

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First Heritage Credit Union to establish venture capital fund

DBJ to facilitate venture capital and private equity transactions

The Development Bank of  Jamaica (DBJ) is implementing initiatives aimed at facilitating venture capital and private equity transactions.                 

They will be undertaken with technical assistance from the Inter-American Development Bank (IDB).  
According to Julian Robinson, Minister of  State for Technology, the initiatives include the establishment of  an appropriate legal and regulatory framework.
A Private Equity and Venture Capital Association will also be established.

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DBJ to facilitate venture capital and private equity transactions

What will make venture capital work in Jamaica?

THE success of any venture is determined by the willingness of the participants to co-operate toward a good end.

Venture Capitalism (VC) is not new to Jamaica, but for many reasons, among which reside the perception of intense greed among providers of capital, and lack of accountability and appreciation of the risks involved in investing in untried ventures, it has not been the resounding success it has been in other markets.The launch of the Jamaica Venture Capital Programme by the Development Bank of Jamaica has signalled to many that the Government of Jamaica is prepared to support both funders and businesses to more fully explore the possibilities toward success. The involvement of DBJ in such a scheme is important toward bridging the gap between the stakeholders, by taking risk through technical support, development of a clear framework for pursuit, and actual capital injection.CONDITIONS FOR VC TO WORK IN JAMAICAIn order to create a more sustainable VC ecosystem (business environment) that converts the development of ideas to an attractive business venture for venture capitalists and other investors and financiers, a supportive legislative framework is needed, which is clearly defined on dealing with company and individual bankruptcy issues.The framework also requires mechanism for investors to exit their investments, such as the Jamaica Junior Stock Exchange, while the environment should enable the ease of doing business with the simplification of the taxation regime, the process for paying taxes and the establishment of business.It is important to increase the perception of fairness by having independent valuations to guide the negotiations to determine the percentage shareholding that would be acquired by the VC investor. Independent valuations provide the level of understanding needed for funding the business, taking into consideration cash flows (historical and expected), the market potential of the product, and the industry and broad environment for operations and convert the emotional ties of an idea into a potentially capitalised transaction.Additionally, Government support is needed to accelerate the change in the investor mindset that allows for allocation of investing funds into risky ventures. For example, loosening the restrictions on Pension Fund investment that would allow part of this pool to be channeled to say VC investments.NEED FOR MODERN INSOLVENCY FRAMEWORKIt is not coincidental that countries and regions with a vibrant VC market refer to the business environment in which they operate as the VC Ecosystem; it is that enabling environment that facilitates the birth, growth, renewal and death of businesses.An element of this VC Ecosystem is the “licence to fail”. Unfortunately, business failure in Jamaica has historically been viewed very negatively and the stigma associated with insolvency/bankruptcy has served to stifle entrepreneurial drive and the pursuit of innovative ideas.The current stigma associated with insolvency is the antithesis of a vibrant VC ecosystem which is predicated on large volumes of deal flow from which there will not only be some significant winners but there will be many “failures” along the way.The present stigma associated with insolvency can be mitigated if legislation is in place that fosters an easier route to restructuring that focuses on early intervention to rescue the company where practical. It is therefore imperative that we move quickly to enact the proposed Insolvency Act which will provide one of the key pillars for stimulating more private investments.The major emphasis of any new insolvency legislation must be to strengthen the formal rescue processes and options open to companies and their investors during periods of distress which many will no doubt face. For the VC ecosystem to be balanced there must be a business-friendly process for failure and renewal that does not permanently punish those pursuing innovative ideas.Just as seeds need a fertile environment in which to grow and that fertility is fostered by the enrichment provided by other decayed seeds, so too it must be appreciated that the growth and development of businesses and the economy will be facilitated by business failure and insolvency. The strongest will survive but they usually bear many fruits.Some of the future winners will be the proverbial phoenix rising from the ashes.This is the virtuous venture capitalist space that Jamaica needs to foster in “Seeding Tomorrow’s Opportunities”.The launch of the Jamaica Venture Capital Programme by the Development Bank of Jamaica has signalled to many that the Government of Jamaica is prepared to support both funders and businesses.

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What will make venture capital work in Jamaica?

Bullish on venture capital: DBJ not solely relying on lawmakers

THE Development Bank of Jamaica (DBJ) is looking at working around current laws to enable the start-up of venture capital (VC) funds in 2014.

The state agency plans to provide seed capital for the establishment of such a fund next year, when it will invite investors wanting to pool their money and invest in small and medium-sized enterprises (SMEs) to participate.Now, the DBJ is mulling over recommendations from lawyers on new regulations and laws needed for a legal framework to govern VC funds.But having no control over the pace at which bills crawl through the legislature, the DBJ has to figure out how to use existing laws to make those investments happen in the near term.“Whatever the workaround that can be achieved in the next year we want to be able to put that in place so that any entity that wants to establish a venture capital fund can,” said Audrey Richards, who is leading the venture capital project for the development bank.“We do recognise that from an investment point of view, pension regulations and insurance regulations are still not clear whether these funds can invest, or how much they can put in venture capital,” she told the Jamaica Observer at its Monday Exchange held at its Beechwood Avenue headquarters in Kingston.Indeed, about $300 billion are invested in pension funds in Jamaica, so even a small percentage being directed towards SMEs could be substantial.Current regulations for collective investment schemes require that investors wanting to pool funds from others for investment would have to do so using unit trust or mutual funds, which Richards reckons would not be the “best place” for venture capital.“There is a new collective investment scheme regulation being put in place by the Financial Services Commission,” she said. “It is something we looked at and identified as one of the things that needs to happen very quickly.”Policymakers are also looking at modernising an antiquated Arbitration Act and work has begun on changes to insolvency laws, which the DBJ expects to see legislated over the next year.But the year 2016 remains a major goalpost for getting all the legal framework to put venture capital funds in place.With the backing of the Inter-American Development Bank (IDB), the DBJ aims to provide capacity-building for some 100 SMEs over the next three years, with at least 30 being ready to get venture capital, and at least five receiving financing from VC funds by 2016.And the state agency hopes to kick-start such funding with its own capital as early as next year.“We want to identify fund managers that DBJ can co-invest with, and these fund managers would undertake the investments in the SMEs or start-ups,” said Richards. “We are looking to invest with qualified fund managers over the next year.”It is still too early to determine how much capital will find its way in the first venture fund, but the Multilateral Investment Fund (MIF), the arm of the IDB that focuses on private equity, suggests that the minimum critical mass for VC funds in the region ranges between US$20 million ($2 billion) and US$50 million, depending on the size of the country.“This is needed to provide several financing rounds to SMEs and to retain skilled staff at the fund management company,” said a 2011 MIF report on building a local venture capital industry in Latin America and the Caribbean (LAC). “Since every country in the LAC region has very few seed and VC funds, each fund should have enough capital to provide several rounds of financing to the best SMEs and not rely on there being other funds providing subsequent rounds, as happens in the US and other developed markets.”Audrey Richards, consultant on the Jamaica Venture Capital Programme. (PHOTO: NAPHTALI JUNIOR)

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Bullish on venture capital: DBJ not solely relying on lawmakers

DBJ hosts major venture capital conference September 9

MANAGING Director of the Development Bank of Jamaica (DBJ) Milverton Reynolds is hoping that the venture capital conference — ‘Advancing innovation and entrepreneurship – Seeding Tomorrow’s Opportunities’ — on September 9 at the Jamaica Pegasus hotel in Kingston will be “oversubscribed”.

Reynolds said the conference, which is part of the educational thrust about the Jamaica Venture Capital Programme (JVCP), launched in February this year as a partnership between the DBJ and the Inter-American Development Bank (IDB), will answer important questions in the minds of stakeholders at all levels.“In the last few years the DBJ has placed strategic focus on small and medium-sized enterprises (SMEs). What we have been seeing is that, for a variety of reasons, access to finance continues to elude many of the SMEs that we would like to see in a position to access financing so that they can grow their business. This applies to not only established SMEs but also to young entrepreneurs who would like to establish themselves, but the access to financing keeps eluding them,” Reynolds told editors and reporters at the weekly Jamaica Observer Monday Exchange at the newspaper’s Beechwood Avenue offices in Kingston.“Some of the reasons for their inability to access funding relates to their business models; a lot of them don’t have the capability to put together a business plan so that they can go to the bank and access financing, some of them they are not registered or they don’t have an account,” he pointed out.Yesterday, Audrey Richards, project consultant with the Jamaica Venture Capital Programme, said the conference would expose participants to expertise from across the globe as well as those available locally.“We are bringing in a number of experts from different countries, mainly the United States, but included among them is Paul Ahlstrom, who is himself an entrepreneur and venture capitalist, and he has been involved in the development of eco-systems in a number of countries and he surely recognises what is needed for entrepreneurs,” she said.From the Multilateral Investment Fund (MIF) persons will share in the knowledge from Susana Garcia-Robles, principal investment specialist for the MIF, which has participated in a number of venture capital and private equity investments across Latin America.In addition, the conference will benefit from the expertise of Cate Ambrose, who is head of the Latin American Venture Capital Association, which has members in Latin America and the Caribbean.“They have developed a scorecard which they use to rank venture capital markets in venture capital industries in all of these different countries. Jamaica currently doesn’t have a ranking, Trinidad and Tobago does. One of the things we want to be able to do is to be ranked on that scorecard to show where Jamaica is to the world. It is something that international investors would look to see so that is very important,” Richards noted.“We also have a number of local and other international presenters and fund managers, there are a number of companies, as well as individuals who have been involved in venture capital quietly. But what we have recognised is that there is a lot of interest, not just from corporate Jamaica but also institutions, because everybody now sees the need to diversify their portfolios because of the high percentage concentration in government of Jamaica securities that everybody is now seeking to diversify away from,” she added.The all-day affair, which officially kicks off at 8:30, will begin with registration at 7:30 and end at 8:30 that evening. It will be followed by a post conference networking reception.“It’s a very busy day, it’s a lot of information, and what it is we want at the end of the day that there is an understanding of not only the programme we are embarking on but what the market and the investors are saying, what other countries have done and what we need to be doing here in Jamaica,” Richards said.Following the conference, the DBJ will pull together a number of stakeholders to finalise the areas pinpointed for development, Richards told the Observer.“Based on that we will pull together a strategic plan to access funding,” she said.Participants in yesterday’s Jamaica Observer Monday Exchange (from left) Audrey Richards, project consultant for the Jamaica Venture Capital Programme; Milverton Reynolds, managing director of the Development Bank of Jamaica; Wayne Beecher, senior specialist at the Multilateral Investment Fund, a member of the Inter-American Development Bank; and Lisandra Rickards, entrepreneur development trainer at the Branson Centre of Entrepreneurship. (PHOTO: NAPHTALI JUNIOR)

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DBJ hosts major venture capital conference September 9

Can Jamaica create a sustainable venture capital industry?

IN a press briefing Wednesday, Development Bank of Jamaica (DBJ) CEO Milverton Reynolds announced that his institution would be hosting a venture capital conference entitled “Advancing innovation and entrepreneurship – Seeding Tomorrow’s Opportunities” on September 9th at the Pegasus hotel.

One of the world’s leading experts on venture capital – Harvard Business School Professor Josh Lerner – would headline the event, supported by Patricia Freitas, the creator of the highly successful INOVAR venture capital project in Brazil, and Patricia Garcia – Robles, the Principal Investment Officer in charge of the IDB’s Multilateral Investment Fund (MIF) early stage equity group, who serves on over 20 boards of directors and investment committees of seed and venture capital funds. It would be an opportunity for Jamaicans to learn about venture capital first-hand, from both local and international experts.The conference is a key part of the Jamaica Venture Capital Programme (JVCP), launched in February as a partnership between the DBJ and the IDB. At that time, the IDB’s regional Caribbean head, Gerard Johnson, signed an agreement for the IDB to provide US$150,000 in grant assistance for the project, with counterpart funding of US$128,000 from the DBJ. The grant has funded a market analysis by Freitas, a strategic plan for the development of a venture capital ecosystem, and a communication strategy to build awareness among stakeholders and the general public on the importance of equity financing and an appreciation for venture capital.In his presentation, DBJ CEO Milverton Reynolds admitted that several previous attempts at creating a venture capital industry in Jamaica hadn’t really succeeded, but he believed that this attempt was different in being both “sustainable” and “inclusive”.DBJ Chairman Joe Matalon expanded on the issue of why venture capital hadn’t worked in Jamaica, arguing that the main issue was a need to create a venture capital ecosystem. Past efforts had focused mainly on the demand/funding side rather than taking an in- depth approach. Examples of a more in-depth approach included sensitising local industry, the training of local venture capital managers, and the preparation of potential investees (local companies) to be able to qualify for investment by a typical venture capital fund. Previous efforts had not been sufficiently grounded in the private sector, and while there had been individual successes, such as JMMB, the industry needed to be sustainable. The project would be launched over the next three years, and requires the involvement of all stakeholders to get companies ready for venture capital investment e.g. lawyers, fund managers, pension funds, angel investors, incubators etc.In the case of pension funds, Matalon noted, the typical Jamaican pension fund is invested very conservatively in public equities, real estate, and Jamaican Government paper. As would be expected, Jamaica’s previously very high interest rate environment had caused “risk” investment to wither. Recent changes in the macro environment, however, had changed that dynamic. Pension fund trustees were now looking at different asset classes as yields on government paper were now very low compared with the very high yields available in the past.Matalon argued that “he didn’t think the venture capital industry was going to happen overnight” and that the worst thing the DBJ could do was just put $1 billion dollars into a fund as they hadn’t yet done the work needed, and in any case any future fund should not be a DBJ fund. The DBJ would instead seek to be a catalyst for a private sector-led industry, co-investing with qualified private sector managers, who would conduct the necessary due diligence and make the investment decision regarding the capital financing of eligible projects.Addressing the issue of whether the state of the economy would negatively impact the creation of a venture capital industry in Jamaica, Matalon observed that “the investment community was not looking for announcements anymore, but wanted to see credible action”.Finally, responding to further questions as to why venture capital had not been a success so far in Jamaica, JVCP coordinator Audrey Richards advised that this would be addressed in detail at the conference. Further information was provided by the DBJ’s information sheet, “Why attend the conference?”, which addressed a number of potential issues related to the question of what is different this time around, including “an appropriate legal and regulatory framework” to “ensure that entrepreneurs and investors understand the rules, understand what is expected of them in entering contractual arrangements and how each party can be expected”. It also stated that the conference would address “the link between venture capital and private equity markets and the very successful Junior Market of the Jamaica Stock Exchange” and how the venture capital market can “create access to the stock exchange for an entrepreneur”.Development Bank of Jamaica (DBJ) Chairman, Joseph Matalon (centre), emphasises a point during Wednesday’s media briefing at the institution’s New Kingston offices, where he outlined details of developments pertaining to the Jamaica Venture Capital Programme’s (JVCP) implementation, being undertaken by the DBJ; and the upcoming conference in September, where the initiative is slated to be launched. Listening keenly are DBJ Managing Director Milverton Reynolds and JVCP Co-ordinator and Manager, Audrey Richards. (PHOTO: JIS)

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Can Jamaica create a sustainable venture capital industry?

Capital and Credit rebranded JMMB Merchant Bank

THE Jamaica Money Market Brokers (JMMB) Group formally rebranded Capital and Credit Merchant Bank as JMMB Merchant Bank as part of the company’s wider integration efforts.

JMMB acquired the Capital and Credit Financial Group last year, putting the company in a better position to offer ranges of financial solutions within a single group of companies, said JMMB in a press release.The three bank branch locations in New Kingston, Ocho Rios and Montego Bay now have signage to reflect the name change.With the deal, JMMB delved into the restricted unit trust market with real estate, equity and fixed income trusts.The bank offers to its customers deposit and loan products as well as foreign exchange trading.JMMB aims to provide a new way of banking to Jamaicans, according to Jerome Smalling, chief executive officer, JMMB Merchant Bank. It is pursuing a commercial bank licence, and is also pushing to grow its loan portfolio.“As the third largest financial institution in Jamaica, the JMMB Group is perfectly poised to continue on its growth path and my vision is to see us expand our client base by capitalising on the reach provided by the acquisition of the Merchant Bank,” he said.The company wants to become a leading financial institution in the Caribbean.“In developing into an even stronger indigenous financial powerhouse in Jamaica and the Caribbean, we pledge to remain focused on what truly matters — the financial health and happiness of our clients,” said Keith Duncan, JMMB Group, CEO.“As a Group, JMMB allows clients to trade in the regional and local equities market — JMMB Securities, with the JMMB Insurance Brokers. The company offers health insurance.The company operates in the Dominican Republic, and Trinidad and Tobago, specifically through the Intercommercial Bank of Trinidad, a commercial bank, which allows it to further diversify our offerings to clients in the Eastern Caribbean.“Strategically, we are building an integrated financial services model with securities dealing, portfolio management, banking and insurance,” said Duncan. “In diversifying across services and the region we are reducing risk across the board.”The re-branded JMMB Merchant Bank on Grenada Way in New Kingston. (PHOTO: PAUL MULLINGS)

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Capital and Credit rebranded JMMB Merchant Bank