:: PROJECT INVESTMENTS ::

:: PROJECT INVESTMENTS ::

 

NIBJ aims to play a pro-active role as an investor in the local capital market, to act as a catalyst for investors with new ideas and to assist in the expansion of medium to large-scale businesses.

Through equity and quasi-equity financing, NIBJ invests in development projects that are designed to improve and broaden the country’s economic base. The Bank makes investments, primarily to finance capital expenditure, in the seven key economic sectors of agriculture, manufacturing, mining & minerals, entertainment, infrastructure, information technology, and tourism, which are supported by the National Industrial Policy (NIP).

All NIBJ investments have to be approved by the Board of Directors on the recommendation of the Investment Committee whose meetings are held in the penultimate week of every month.

In order for the Project Investment Unit to have sufficient time to analyse and evaluate a financing request, all required or requested documentation must be submitted a minimum of six weeks before an Investment Committee meeting.

:: OUR INVESTMENT INSTRUMENTS ::

Equity financing will primarily take the form of Preference Shares or Convertible Debenture and the Bank’s investments are limited to:

  • A minority stake in any one project – a guideline of 20 per cent of the company is used typically and maximum of 40 per cent may be used in certain circumstances.
  • A predetermined amount per sector, based on the total funds available for investment in projects.
  • Investments made in Jamaica.
Ordinary Shares / Preference Shares
  • Ordinary Shares give shareholders the right to vote thereby giving them control over the management of the company.
  • Ordinary Shares normally carry the residue of any distributed profits after the Preference Shares have received their fixed dividend.
  • NIBJ will be issued voting Ordinary Shares.
  • The Dividend Policy will be amended to reflect the definition of profits available for distribution to exclude depreciation, and other non-cash expenses (defined for each project).
  • The Articles and Memorandum of Association will be amended to specify the way in which the company’s profits shall be applied. This is to include payment of the Preference dividend so that the Preference Shareholder shall have a contractual right to its dividend even if the company has not declared the payment by way of a company resolution in general meeting.
  • NIBJ seeks market comparable minimum effective net yield on its investments by way of dividends distributed and capital gains.
  • An exit strategy must be identified to ensure sale of NIBJ’s shares by the end of the investment period (within seven years). The shares will be offered to shareholders first and thereafter NIBJ can seek outside investors.   Top

Redeemable Preference Shares
  • Usually have a preferred fixed dividend which is payable before the other class of shareholders are paid any dividend.
  • The dividend rate is set with the intent of providing a market comparable minimum effective net yield which can be accomplished by utilising varying combinations of fixed dividends and profit participation elements.
  • Are presumed cumulative unless expressly described as non-cumulative.
  • Expressly carry voting rights unless agreed otherwise.
  • In a winding up or other liquidation procedure, NIBJ as a Preference Shareholder will be paid out in priority to ordinary shareholders, unless otherwise stated in the terms of issue, but rank below creditors.
  • Redeemable Preference Shares, if permitted, are subject to conditions that are designed to safeguard against a reduction of capital. NIBJ Shares are normally redeemed within seven years.

Adjustable-rate Preferred Stock
Adjustable-rate preferred stock has features as previously described except that it pays a dividend that is adjustable, usually quarterly, based on changes in the Treasury Bill rate or other money market rates.

Convertible Debentures
  • Convertible Debentures are corporate securities (shares or bonds) that are exchangeable for a set number of another form – usually common shares – at a pre-stated price.
  • Usually create a fixed or floating charge on the company’s assets as security for the loan.
  • May be single debenture, evidencing a large sum of money lent to the company by a single debenture holder, or the company can create a loan fund known as “debenture stock” which is issued to a number of debenture holders, each of whom is given a debenture stock certificate evidencing a proportion of the total loan he is entitled to.
  • May or may not be one of a series ranking pari passu, i.e. each lender has an equal right to repayment. It is always for a specified sum which can be transferred in its entirety. It is usually redeemable at a fixed future date.
  • The Debenture will be supplemented by a legal mortgage/Bill of Sale and/or joint and several guarantees of principals.
  • The interest rate charged will be market comparable
  • The maximum investment period is 7 years
  • Conversion is at NIBJ’s option. In the event of default NIBJ will have the option to call the facility or convert (all principal and interest/dividend) to Ordinary Shares so that it holds a minimum of 51% of the issued shared capital.    Top
:: CRITERIA FOR ASSISTANCE ::

    In order to qualify for assistance under the equity investment programme, the following criteria must be met: The company should:

  • Be a company registered in Jamaica
  • Not be sole proprietorship
  • Be able to demonstrate a net economic benefit to the country
  • Be able to demonstrate long-term financial viability
  • Utilise local inputs
  • Lead to stimulation of management skills and technological know-how
  • Have good markets for their products or services
  • Demonstrate the ability to meet the projected demand
  • Demonstrate sound management practices
  • Where applicable, have had an Environmental Impact Assessment study done that demonstrates that its operations have no adverse effects on the environment
  • Have in place or establish a dividend policy acceptable to NIBJ
  • Disclose all its associated companies and subsidiaries
  • Be current with all statutory deduction payments evidenced by a Tax Compliance Certificate (TCC)   Top
:: INFORMATION TO BE PROVIDED ::

Application may be made to NIBJ by the company, on a prescribed form. With the application a comprehensive business plan must be provided and should include:

  1. A brief description of the company
  2. Management and Company information:
    a) Organisational structure, curricula vitae of the management and profiles of the directors
    b) Share composition of the enterprise and associated entities/subsidiaries
    c) Personal financial statements for the primary shareholders
  3. Markets, Products and Sales:
    a) Basic nature of the local and export markets, current and potential
    b) Volume of production, unit prices, sales targets, percentage of markets served
    c) Nature of the products, consumers and distribution channels.
    d) Direct/indirect present and future competition
    e) Customs protection, fiscal incentives and import restrictions that affect the company
    f) Other critical factors that affect market potential.
  4. Technical Viability:
    a) Brief description of the production process
    b) Suppliers of equipment and services
    c) Labour, basic infrastructure and public services
    d) Breakdown of operating expenses by major categories
    e) Sources, cost and quality of principal inputs
    f) Restrictions on imported components
    g) Location of plant in relation to suppliers, markets, basic infrastructure and labour
  5. The Financial Plan:
    a) Proposed financial structure for the project/company including breakdown for shareholders’ equity, external equity, including NIBJ and debt.
    b) Current balance sheet for the company showing the value of land, buildings, installed equipment and other fixed assets, as well as liabilities including interest and other operating expenses, indicating the component in foreign exchange where applicable.
    N.B. Current valuations of land, buildings and equipment may be required.
    c) Last three years audited financial statements and up-to-date in-house financial statements.
    d) Pro-forma financial statements (cash flow, profit and loss and balance sheet with assumptions clearly stated) for the estimated period of NIBJ’s investment.
    N.B. A monthly cash flow statement is required for the first year.
    e) Financial statements of associated companies/subsidiaries.
  6. Environmental Factors:
    a) Proof that the company is in compliance with regulations prescribed by the Natural Resources Conservation Authority (NRCA)
    b) Description of the measures incorporated into the production process to mitigate any adverse environmental impact
  7. Political, Legal and Economic factors:
    a) Government policies relevant to the industry and the company, particularly current incentive or support programme
    b) Nature and extent of economic benefits from the company, such as improved technology, generation of jobs, use of natural resources, foreign exchange generation/savings, other aspects of development
    c) Legal claims or liens outstanding
  8. Corporate Documentation:
    a) Copy of Memorandum and Articles of Association
    b) Copy of Certificate of Incorporation
    c) Existing Shareholders Agreement(s)   Top

:: CONDITIONS OF NIBJ'S INVESTMENT ::

The conditions of NIBJ’s investment (regardless of the instrument used) are typically as follows (these may vary depending on the features of the project):  

  1. Finalisation of all financing arrangements
  2. Submission of an Opening Balance Sheet upon start up and thereafter, timely submission of Quarterly Budgets and management reports to facilitate efficient project monitoring
  3. Agreement to submit monthly in-house financial reports no later than 10 days after month end and to submit annual audited statements within 90 days of the financial year end
  4. Agreement to submit monthly bank statements
  5. Close monitoring of every disbursement particularly for working capital support to ensure that resources are maximised to the full benefit of the company
  6. NIBJ must give approval for all capital expenditure in excess of $500,000
  7. Proof of requisite general and other insurance coverage
  8. The event of default on payment is defined as failure to make interest (dividend) and/or principal payments (share redemption) in three (3) cumulative months after the due date
  9. If default occurs and NIBJ exercises its right to convert to Ordinary Shares it will be at a rate that guarantees a minimum of 51% of total issued shares
  10. The institution of satisfactory systems for the maintenance of accounts being set up and suitable accounting and management staff employed
  11. All shareholders loans must be converted into equity or subordinated
  12. Fulfilment of all statutory obligations and other Government liabilities
  13. Presentation of Dividend Policy that is acceptable to NIBJ
  14. Establishment of the Sinking Fund to ensure the redemption of NIBJ’s Preference Shares within stipulated time frame
  15. Copies of all contracts between the client and third party contractors
  16. Unlimited Cash Flow Support Guarantee in a form acceptable to NIBJ from a party that demonstrates sufficient cash flow to support this guarantee, and an undertaking to meet any shortfall in operating deficits/debt service until such time as the project has demonstrated its viability
  17. Unlimited Cost Overrun Guarantee acceptable to NIBJ
  18. Confirmation that all Government and Planning Board approvals and permits are in place, if required
  19. A Chartered Quantity Surveyors (CQS) Report from CQS acceptable to NIBJ must be submitted
  20. The contractors’ agreement for the construction phase of the project (including performance guarantees and contractors liability insurance) must be approved by NIBJ, if appropriate
  21. A mutually acceptable schedule for the disbursement of NIBJ’s investment
  22. Representation by NIBJ on the Board of Directors of the company in line with our equity involvement
  23. Payment of such processing/commitment fees as are due upon acceptance of NIBJ's financing offer.    Top
:: ONLINE FORMS ::

Need financial assistance for project development? Apply online now.

 
 
National Investment Bank of Jamaica. Copyright 2006. All rights reserved.