Island Car Rentals refinances, expands

ISLAND CAR Rentals Limited has secured a $2.2billion arsenal from a bond issue that will be pumped into expansion of the company’s Montego Bay operations, and used to replace existing bank debt.

Chairman and Managing Director Michael Campbell says the seven per cent bond, due to mature in seven years, will refinance debt that was costing the company 10 per cent to service, on average. But he also suggested that the three percentage point savings from the $1.66 billion of refinanced borrowings was a secondary benefit for the 45-year-old company, which welcomed the reprieve from its bankers.

“It’s not so much a matter of savings in finance charges, but we wanted a bit more flexibility and control that we were not finding at the banks,” he said.

Around a fifth of the proceeds, $481 million, will pay for the MoBay expansion.

Regional ratings agency CariCRIS gave the bond a jmBBB+ rating, with a stable outlook, citing Island Car’s leading market position as well as the company’s strong brand equity, large fleet and service levels, as well as growth prospects arising from increased activity in Jamaica’s tourism industry.

Campbell found the rating a bit disappointing.

“We expected a lot better in terms of the ratings, but it’s still investment grade and we will work with that,” he said.

There is now more of an effort in the local securities market to seek the imprimatur of CariCRIS on corporate debt issues so that potential investors may feel more comfortable about taking a bet on private businesses whose finances and inner workings are largely out of public view.

“We want to work with CariCRIS in having bond issues rated. We believe that it is the way to go so that investors can be better informed as they make decisions,” said Gregory Samuels, executive director & head of corporate advisory at Sygnus Capital, the firm that arranged the ICR bond. Sygnus itself is a nascent investment firm aiming to carve market share for itself as a dealmaker.

The near half-billion dollars that Island Car will invest in Montego Bay will more than double the capacity of the existing operation. Campbell