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CPJ bond payout, tax settlement

TOURISM INDUSTRY food purveyor Caribbean Producers Jamaica (CPJ) has retired its largest chunk of long-term debt. In a late-Thursday notice to the Jamaica Stock Exchange (JSE), CPJ said the aggregate J$500 million in “bonds will be completely retired on April 8th, 2023”, the notice read.

CPJ had noted in its year-end June 2022 report that, in April 2018, it floated bonds via private placement, to the tune of US$3,343,806. The bonds, with an option to roll over, were due in May 2023. They were part of a larger stock of long-term debt totalling US$6.68 million.

Contacted for comment, Executive Chairman Mark Hart said interest rates on the bonds started out at eight per cent, with a variable interest rate being applicable after three years. He says, with the recent increase in Bank of Jamaica policy rates, interest due on the debt was hovering at a rate of 12 per cent.

Hart says, as things stand now, CPJ has no appetite for interest rates currently on the market.

“It was up for renewal and, with the interest rates where they are now, we opted not to take on that additional debt by rolling it over, but rather to retire the debt,” Hart told Sunday Business.

In the meantime, CPJ has increased its credit facilities with its main bank, Scotiabank, but Hart says the move was not contingent on retiring the debt.

“This was just to facilitate our continued record growth and in anticipation of the need for additional working capital,” Hart said, adding that the company has sufficient cash reserves being generated by the business.

He says the company is using a US$2.5 million line of credit from its bankers, which, coupled with regular paying out of debt and the use of revolving loan facilities and other loan payouts on projects, gives CPJ more room to operate.

CPJ also had a contingent liability of $340 million with Tax Administration Jamaica (TAJ). In its second-quarter December 2022 report, CPJ noted that, in 2016, TAJ conducted a general consumption tax audit for the period January 2012 to December 2015, proposing an adjustment to returns for the period.

The company has been contesting the assessment, Hart said, but, recognising that some of the taxes due would have to be paid anyway, it went ahead and paid down the liability.

“We paid about $88 million before, while we had discussions with the authorities,” he informed.

The company says “on March 29th, 2023, the Management of CPJ agreed to a final assessment of J$328 million, of which J$88 million was already agreed upon and paid over to the TAJ in 2017”, the JSE notice read.

Hart says he does not expect to have any other problems as far as taxes are concerned.

“Since then, we’ve had a lot by way of process and technology improvements. We’ve also established internal controls that has left us with a very robust system,” Hart told Sunday Business.

He says CPJ established a meat processing plant in 2011. The company was granted tax concessions under the Export Incentives Act, which became a part of the omnibus legislation covering Special Economic Zones. Since then, some companies have been at odds with the tax authorities and Jamaica Customs over the interpretation of the arrangements.

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