For years, privately owned companies have had many different channels through which they have access to much needed credit. Financial institutions have awarded eligible entities with loans to assist with several operational activities. Recently, with the evolution of how capital can be raised, many companies seek the help the public through the issuing of bonds or the help of an Initial Public Offering (IPO). These measures grant companies the opportunity to facilitate repayment of debt, infrastructure updates, expansions, among others.
The most recent, and second largest bond issue in Jamaica was done by the National Commercial Bank Capital Markets on behalf of The National Water Commission (NWC). Investopedia describes a bond as is a fixed income investment in which an investor loans money to an entity (corporate or governmental) which uses the funds for a defined period of time at a variable or fixed interest rate. Bonds are used to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.
The issue by NWC will be a total sum of $15 billion Jamaican Dollars. It will allow the company to finance the debt it has racked up attributed mostly to the depreciation of the foreign exchange rates, as their loans are foreign currency denominated. This will also assist with mitigating the currency risk they face without having to use most of their revenue (which is the case now) to finance debt. The bond will further be used to develop much needed infrastructure and network to regions across the island which don’t have access to consistent running water.
NWC is a private company which provides a necessary utility to Jamaica, this therefore makes them one of the country’s biggest assets and therefore needs to be protected. Prime Minister Andrew Holness aired his pride for the company in a press conference held on May 15, 2018 where details of the bond were provided. He believes that this bond is the first step to making the entity a publicly traded one, which will further benefit customers, as well as the economy as a whole.
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