CPJ is following the example of the Government of Jamaica in pursuing a debt swap. This one, unlike that of the government’s, will not result in any loss in capital for the holders of the debt. The board recently gave approval for the company to raise $500 million in floating rate secured promissory note. The proceeds will be used to retire loans they current have including related parties loans which climbed to US$12.3 million at the end of March.
But loan capital is not what the company needs, it needs more equity capital. At the end of March, loans and advances by related parties amounted to nearly US$24 million, equity is less than half of that at US$11.7 million. Cash flow is about US$5 million for this year most of which has already been utilized in long term capital expenditure.
Stock Outlook | The working capital on paper is well within accepted norms. The only problem is that liquid funds are not plentiful, with less than US$1 million dollars on the books. The directors are causing the company to skate on thin ice which is what is happening. Seeking a debt swap may save on the interest cost but will merely dent the poor debt to equity ratio, which is well out of line and prudence dictates should be put right fast, not later.
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