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Portland JSX Limited, a fund that invests in privately held companies in Jamaica and Latin America, has slipped deeper into losses that were nine times worse than a year ago.
The fund’s annual results for year ending February 2024 were exacerbated by write-downs related to Outsourcing Management Limited, which trades as itel, and e-grocer Merqueo.
Portland’s losses totalled US$7.24 million, up 790 per cent relative to US$812,000 in 2023. In the process, the group’s accumulated earnings were depleted and its capital was slashed by nearly a quarter. It reflected the tough market conditions faced by its portfolio companies arising from higher interest rates, inflation, and tighter credit conditions.
Portland JSX wrote down its investment in Jamaica-based Outsourcing Management from US$5 million to nil. It comes in the wake of concerns raised by Portland last year that led to itel, a business process outsourcing firm, hiring a new chief financial officer to get its books to “acceptable standards”.
Outsourcing Management’s founder and CEO Yoni Epstein commented that as market conditions improve, Portland would eventually revalue its itel investment upwards.
“The BPO industry has seen some headwinds due to global competitiveness, but with the advent of technology, inclusive of AI (artificial intelligence), and our geographic footprint in the nearshore, we see the deal flow picking back up to pre-pandemic levels,” said Epstein, in response to Financial Gleaner queries.
He added that market conditions could improve later this year into next year with the conclusion of general elections in the United States in November, and the cooling of inflation.
Portland JSX’s investment in Colombia-based Merqueo was also written down to nil from US$4.5 million.
“Any repayment of debt notes and factoring facilities is uncertain at this time, and so is the medium of repayment,” Portland said.
Portland JSX, which started operations in 2015, primarily acts as a limited partner in a wider fund known as Portland Caribbean Fund II. Both funds are managed by Portland Private Equity. Caribbean Fund II’s cycle comes to an end in July 2024. The new Portland Caribbean Fund III’s cycle will end in September 2033. However, each fund can be extended for two additional years.
Last year, Portland JSX indicated that while the pandemic has waned, economic aftershocks in the form of inflation, rising interest rates and credit contraction had created challenging market conditions for its portfolio companies. As such, it asked its shareholders, which are mainly pension funds, to be patient in relation to payouts.
Subsequent to its financial year end, Portland JSX reaped just over $1.46 million as its share of share of the US$8.9 million that flowed to Portland Caribbean from the monetisation of unnamed holdings.
“On April 4, 2024, the fund distributed US$8,923,268, from a partial portfolio realisation,” Portland JSX said in a disclosure within its earning report. “The company’s allocation was US$1,463,933. This transaction is considered a non-adjusting event and therefore not recognised in the company’s financial statements at the reporting date,” it said.
Portland JSX’s management is yet to say declaratively whether the fund will continue to exist beyond its life cycle, and whether it will take positions in Caribbean Fund III’s investments. But there are now indications that it will as its financial’s show spending in relation to the successor fund. Its expenditures last year include US$320,000 that was denoted as PCF III organisational expenses.
In 2022, Portland exited two investments, namely InterEnergy and a Panama-based wind farm. The eight investments that remained in Portland JSX’ portfolio were Productive Business Solutions Limited; Interlinc Group; Diverze Assets Inc/Chukka Holdings; Portland Telecom LP, which holds shares of Liberty Latin America; restaurant and food service operator Grupo IGA; financial services firm Clarien Group Limited; Outsourcing Management; and Merqueo.
The write-downs on Portland JSX’s books from itel and Merqueo slashed retained earnings from $5.6 million to negative $1.6 million for the 2024 financial year. Portland JSX’s capital base was eroded from US$31.4 million to US$24 million as a result.
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