Portland JSX shifting towards debt over equity investments

Portland JSX Limited plans to offer more loans going forward, instead of relying so much on equity investment in businesses for returns.

It is aimed at offsetting periods of volatility, which has resulted in a slide in the equity fund’s capital US$21.5 million, reflecting mark downs on its existing investments.

“We are looking at self-liquidating structures such as preference shares with an equity option, rather than only ordinary shares,” said Chairman of Portland JSX Ricardo Hutchinson at the company’s annual general meting.

Preference shares are a form of debt, the repayment and servicing of which are generally prioritised over the holders of ordinary shares, while minority equity holders are generally the last to get paid.

“We are managing our portfolio and working through our hiccups,” said Hutchinson, who replaced Doug Hewson as chairman on July 12.

Portland JSX was lukewarm on whether the value of the fund will fully recover in the near term.

“Capital fluctuates up or down because of the business that we are in,” Hutchinson remarked. “To the extent that interest rates decline and causes an increase in the value of equities, then you will see that capital going up,” he said.

The private equity fund racked up another quarter of losses in the May-July period, bleeding US$1.5 million. Over the past six quarters, it reported losses in four of those periods and profit in two.

Large write-downs

Its performance reflected the downward revaluation of equities in its portfolio, whether listed on stock exchanges or unlisted. Two large write-downs pertained to its holdings in local outsourcing firm Outsourcing Management Limited, which operates as itel, and Colombia-based Merqueo, an online grocer which gained market share during the pandemic but waned in appeal amid its planned listing on the Nasdaq exchange in the United States.

Hutchinson said the companies still have the potential for revaluation.

“There are ups and down in any investment. We have been very aggressive with the right ‘downs’; still there is value in those portfolios and over the next one to two years, we anticipate recovery,” he said. “The underlining businesses seem to support a going concern. Value exists within them, and hard work will get those companies back and running,” he added.

Portland JSX primarily invests in privately held companies, alongside its bigger affiliates, Portland Caribbean Fund II and Fund III.

steven.jackson@gleanerjm.com