(Trinidad Guardian) The recent decision by Sagicor Financial Corporation (SFC) to raise capital by making a private placement of its shares has puzzled and perplexed three local financial analysts and stock market observers. Contacted for comment, all three asked variations of the same question: why is the company which will be 170 years old this year looking to raise money if it is as sound as it claims to be? On Sunday, SFC announced that it had issued 11,766,705 new shares to the National Insurance Board of Barbados at a price of Bds$3.325 per share—discounting the company’s price on the day of the issue of the shares by 5 per cent.
The issue of new shares to the Barbados NIB, which raised about US$20 million for SFC, dilutes the value of the stocks held by existing shareholders, thousands of whom are Trinidadians. Unusually, Sunday’s statement was made after the deal was closed and no attempt was made by the company to seek the approval of the shareholders for the transaction. Minority shareholder rights advocate Peter Permell said he was “somewhat concerned” at the absence of any explanation as to the purpose for which the proceeds are to be used. While the transaction may be legal, Permell also questioned why Sagicor did not seek to raise capital by a rights issue or public offering. Analysts said the company may be trying to shore up its capital as a result of the impact of the depreciation of the Jamaican dollar on Sagicor.
And Sagicor’s attempt to raise capital comes amidst a sharp reduction in the company’s profitability. For the nine-month period ending September 30, 2009, Sagicor’s net income declined to US$60.3 million from US$74.1 million—a reduction of 22 per cent. The company announced in a notice published on December 20 that its highly respected chairman Terrence Martins was retiring effective December 31, 2009. Speaking with the Guardian on Monday, Martin said his decision to retire had nothing to do with the company and everything to do with his desire to spend more time with his family.
