In Au­gust 2018, a group of main­ly high net-worth Ja­maican in­vestors—found­ed by a then 35-year-old UWI, Mona grad­u­ate, Paul Simp­son—com­plet­ed the au­da­cious ac­qui­si­tion of Bari­ta In­vest­ments Ltd ac­quired from its founder, a Ja­maican in­vest­ment icon, Ri­ta Humphries-Lewin.

The group, then named Cor­ner­stone In­vest­ment Hold­ings Ltd, paid Humphries Lewin, J$3.07 bil­lion (about US$22.78 mil­lion) to ac­quire 75 per cent of Bari­ta In­vest­ments, the com­pa­ny she found­ed in 1977. Most of the mon­ey to fund the ac­qui­si­tion of Bari­ta In­vest­ments was raised by debt, in­clud­ing a US$15.3 mil­lion loan to a com­pa­ny named Pro­duc­tive Ac­tive So­lu­tions, which is a com­pa­ny ben­e­fi­cial­ly owned by Simp­son, the Cor­ner­stone founder.

At its Sep­tem­ber 30, 2018 year end, just over a month af­ter its ac­qui­si­tion by Cor­ner­stone, Bari­ta In­vest­ments de­clared an au­dit­ed af­ter-tax prof­it of J$363.24 mil­lion (about US$2.69 mil­lion) and to­tal rev­enues of J$1.90 bil­lion (about US$14 mil­lion).

Af­ter three years of man­age­ment, the Cor­ner­stone team to­tal­ly trans­formed Bari­ta In­vest­ments, tak­ing its af­ter-tax prof­it from J$363.24 mil­lion as at Sep­tem­ber 30, 2018 to J$4.08 bil­lion (about US$27.69 mil­lion) as at Sep­tem­ber 30, 2021.

That is an in­crease in net prof­it of more than 11 times in three years in Ja­maican dol­lar terms. The rev­enue of Bari­ta In­vest­ments at the end of its 2021 fi­nan­cial year was J$8.11 bil­lion (US$60.25 mil­lion), which is a qua­dru­pling of the funds the com­pa­ny was able to gen­er­ate.

The sharp growth in Bari­ta’s prof­itabil­i­ty turned it in­to one of the top five largest com­pa­nies list­ed on the Ja­maica Stock Ex­change (JSE) by mar­ket cap­i­tal­i­sa­tion, ac­cord­ing to the com­ments by the com­pa­ny’s chair­man, Mark My­ers, in its 2021 an­nu­al re­port.

The record-break­ing in­crease in the prof­itabil­i­ty of Bari­ta In­vest­ments was large­ly due to the abil­i­ty of Simp­son to raise funds.

In the three-year pe­ri­od from Oc­to­ber 1, 2018 to Sep­tem­ber 30, 2021—a pe­ri­od that in­clud­ed shut­downs in Ja­maica as a re­sult of the COVID-19 pan­dem­ic—Bari­ta, sup­port­ed by Cor­ner­stone, raised over J$34 bil­lion (about US$226 mil­lion) from in­vestors.

That sum in­clud­ed J$24.3 bil­lion (about US$162 mil­lion) that Bari­ta raised in two ad­di­tion­al pub­lic of­fer­ings (APO) in Sep­tem­ber 2020 (J$13.5 bil­lion) and Sep­tem­ber 2021 (J$10.8 bil­lion).

To main­tain their 75 per cent stake in Bari­ta, the share­hold­ers of Cor­ner­stone—who in­clud­ed Ja­maicans such as James God­frey, Hugh Coore, Nigel Chen See, Arnold Aiken, Mark My­ers, Paul Simp­son, Dun­can Stew­art and his sis­ter Jacque­line Stew­art-Lech­ler—con­tributed 75 per cent of the ap­prox­i­mate­ly US$226 mil­lion that Bari­ta raised in the two APOs. That is about US$169.5 mil­lion.

Al­so, the share­hold­ers of Cor­ner­stone In­vest­ments Hold­ings Ltd—which was re­named Cor­ner­stone Fi­nan­cial Hold­ings Ltd in Feb­ru­ary 2020, when the com­pa­ny mi­grat­ed from St Lu­cia to Bar­ba­dos—made in­vest­ments in the two APOs in ac­cor­dance with their share­hold­ings in the par­ent com­pa­ny.

Prof­it slow­down

While Bari­ta pow­ered through the COVID-19 pan­dem­ic, its per­for­mance may have been im­pact­ed by the high­er in­fla­tion and the high­er in­ter­est rates that have pre­vailed in Ja­maica over the last 18 months.

While Bari­ta’s prof­its in­creased by 11 times from the 2019 to 2021 fi­nan­cial years, the com­pa­ny’s af­ter-tax prof­it rose on­ly 4.01 per cent to J$4.22 bil­lion in 2022 from J$4.05 bil­lion in 2021. Bari­ta’s rev­enue was 10.28 per cent high­er in 2022 at J$8.95 bil­lion in 2022 from J$8.11 bil­lion.

The com­pa­ny record­ed an 88.5 per cent de­cline in its to­tal com­pre­hen­sive in­come, which dropped from J$3.87 bil­lion in 2021 to J$446.24 mil­lion in 2022.

That was as a re­sult of J$6.63 bil­lion in un­re­alised loss­es on se­cu­ri­ties held at fair val­ue in oth­er com­pre­hen­sive in­come (FVO­CI).

The slow­down in the prof­itabil­i­ty of Bari­ta In­vest­ments comes as its par­ent, Cor­ner­stone Fi­nan­cial Hold­ings Ltd makes a push to be­come a fi­nan­cial hold­ing com­pa­ny in Ja­maica.

The fi­nan­cial health of the Cor­ner­stone Fi­nan­cial Group is be­ing close­ly watched in Port-of-Spain, as T&T’s ma­jor­i­ty State-owned First Cit­i­zens Group is the Ja­maican com­pa­ny’s sin­gle largest cred­i­tor as well as be­ing the sec­ond largest share­hold­er of Cor­ner­stone’s largest as­set, the Ja­maica Stock Ex­change-list­ed, Bari­ta In­vest­ments Ltd.

Found­ed in No­vem­ber 2017 by Paul Simp­son, who turned 40 in De­cem­ber, Cor­ner­stone Fi­nan­cial record­ed a 64.63 per cent de­cline in its to­tal com­pre­hen­sive in­come for the fi­nan­cial year end­ed Sep­tem­ber 30, 2022. Cor­ner­stone Fi­nan­cial re­port­ed a to­tal com­pre­hen­sive in­come of US$26.38 mil­lion in its 2022 fi­nan­cial year, down from the US$74.61 mil­lion it earned in 2021, ac­cord­ing to the com­pa­ny’s au­dit­ed fi­nan­cial state­ment, which was seen by the Busi­ness Guardian.

Cor­ner­stone Fi­nan­cial, which is pri­vate­ly held, record­ed a sharp de­cline in its to­tal com­pre­hen­sive in­come be­cause the un­re­alised gain (net) on its quot­ed eq­ui­ties dropped by 75.58 per cent from US$71.29 mil­lion, as at Sep­tem­ber 30, 2021, to US$17.40 mil­lion at Sep­tem­ber 30, 2022.

Cor­ner­stone Fi­nan­cial’s on­ly quot­ed eq­ui­ty is its 74.51 per cent share­hold­ing in Bari­ta In­vest­ment Ltd.

Cor­ner­stone Fi­nan­cial’s in­vest­ment in Bari­ta In­vest­ment was val­ued at US$692.71 mil­lion on the hold­ing com­pa­ny’s bal­ance sheet, at the end of its 2022 fi­nan­cial year, up by 3.64 per cent over the val­u­a­tion of US$668.37 mil­lion at the end of its 2021 fi­nan­cial year.

Cor­ner­stone’s in­vest­ment in Bari­ta ac­counts for 88.96 per cent of the com­pa­ny’s to­tal as­sets of US$778.65 mil­lion, as at Sep­tem­ber 30, 2022.

In ef­fect, the val­ue of Cor­ner­stone Fi­nan­cial ris­es and falls based on the per­for­mance of its main as­set, Bari­ta In­vest­ment.

First Cit­i­zens con­nec­tion

Ac­cord­ing to Cor­ner­stone Fi­nan­cial’s 2022 au­dit­ed fi­nan­cials, First Cit­i­zens has ex­tend­ed loans to­talling US$60 mil­lion in three fa­cil­i­ties to Cor­ner­stone Fi­nan­cial:

• A loan of US$25 mil­lion that ma­tures in April 2027 and at­tracts a vari­able in­ter­est rate, which was at 6.77 per cent (2021—4.5 per cent) at the state­ment of the fi­nan­cial po­si­tion date. The in­ter­est rates com­prise LI­BOR and a reprice mar­gin;

A loan of US$15.1 mil­lion, which ma­tures in Ju­ly 2024 and at­tracts a vari­able in­ter­est rate of 8.43 per cent (2021—5.12 per cent). The in­ter­est rates com­prise LI­BOR and a reprice mar­gin.

• A loan of US$20 mil­lion, which ma­tures in Feb­ru­ary 2025 and at­tracts a vari­able in­ter­est rate of 5.73 per cent. The in­ter­est rates com­prise LI­BOR and a reprice mar­gin.

All of the First Cit­i­zens loans to Cor­ner­stone Fi­nan­cial are “se­cured by the as­sign­ment of list­ed shares held at the Ja­maica Cen­tral De­posi­tary Ltd.” The shares that Cor­ner­stone has as­signed to First Cit­i­zens to se­cure the US$60 mil­lion in loans at Bari­ta In­vest­ments se­cu­ri­ties.

An ar­ti­cle pub­lished in the Guardian on March 31, 2022, based on a state­ment from Cor­ner­stone, out­lined: “As at March 25, the to­tal num­ber of shares pledged to First Cit­i­zens Bank Ltd stood at 184,333,333 or­di­nary shares.

“The shares are val­ued at J$16,365,113,304.74 or US$106,748,799.47 based on a share price of J$88.78,” it stat­ed.

“We note the shares in BIL are to pro­vide a min­i­mum fa­cil­i­ty cov­er­age of 1.5 times and at the cur­rent trad­ing price, the ex­ist­ing shares pro­vide cov­er­age of 1.78 times. To date, there have been no col­lat­er­al or covenant breach­es not­ed,” the doc­u­ment stat­ed.

Bari­ta In­vest­ments stock closed at J$78.96 on Tues­day.

As at Sep­tem­ber 30, 2022, FCIS, a whol­ly-owned sub­sidiary of the First Cit­i­zens Group, held 90,795,154 Bari­ta shares, equal to 7.43 per cent of the Ja­maican in­vest­ment com­pa­ny. Those shares closed at J$107.89 on Sep­tem­ber 30, 2022, mak­ing the T&T com­pa­ny’s share­hold­ing worth J$9.79 bil­lion (US$65.17 mil­lion).

On April 6, 2023, Bari­ta trad­ed at J$79.12, down by 26.66 per cent from the end of Sep­tem­ber last year, with the FCIS stake worth J$7.18 bil­lion (US$47.57 mil­lion).

Ac­cord­ing to the FCIS 2022 an­nu­al re­port: “…if prices for eq­ui­ty se­cu­ri­ties list­ed in Ja­maica move by 15 per cent (2021: 15 per cent) re­spec­tive­ly with all oth­er vari­ables in­clud­ing tax be­ing held con­stant, the ef­fects on the oth­er com­pre­hen­sive in­come would have been plus/(mi­nus) TT$64.5 mil­lion in 2022 and plus/mi­nus TT$65.8 mil­lion in 2021.”