Proceeds to retire higher-cost debts and deployed to strengthen working capital

Durrant Pate/Contributor

Jamaica’s leading battery retailer, distributor, and renewable energy solutions company, Tropical Battery has successfully completed a sale-lease back transaction involving its Ferry Road headquarters property in St. Catherine.

The transaction generated gross proceeds of $950 million, which will be applied to retire higher-cost debt obligations, thereby reducing the company’s interest expense on a go-forward basis and reducing the annualised interest burden. The balance was deployed to strengthen working capital, supporting inventory investment and operational requirements across the Group’s distribution network while advancing its Strategic Deleveraging Plan. 

Interest coverage ratios have improved as a direct result of the transaction. Tropical Battery retains full operational occupancy of the property under a long-term lease arrangement, and there is no disruption to business operations.

Structure and accounting treatment 

The transaction structure is a sale-leaseback, where Tropical Battery sold its Ferry headquarters it owned, and now leases it back under a structured agreement. The company will continue to operate from the same location without interruption. 

Under International Financial Reporting Standard (IFRS) 16, this transaction results in the recognition of a right-of-use asset and a corresponding lease liability on the consolidated balance sheet. Tropical Battery is being explicit about this transaction because it wants shareholders to understand the accounting clearly: “This is not a straightforward debt-elimination event. It is a restructuring of how the Group funds its occupancy — converting a debt-secured owned asset into a contractual lease — with the material effect of unlocking previously illiquid capital and deploying it at higher utility.”

Full IFRS 16 disclosure, including the right-of-use asset recognised, the lease liability amortisation schedule, and the net impact on reported debt metrics, will be provided in the Company’s next interim financial statements.

Providing greater clarity on the transaction, CEO Alexander (Zander) Melville explains, “We owned a building. That building had real value — but it was not generating a return that justified the cost of the debt secured against it, and it was not liquid. We unlocked that value, paid down expensive obligations, and put the capital to work in the operating business. That is a straightforward capital allocation decision, and it is the right one for our shareholders.”

Deleveraging Programme 

According to Melville, “the transaction is one component of a broader, multi-year programme to reduce the Group’s total debt load and interest expense. High interest costs, a direct consequence of the rapid expansion and acquisition activity that built the Group to its current scale, represent one of the most significant financial challenges we face. We have been explicit about this with investors, and we remain so.”

Melville states, “The sale-leaseback is consistent with and advances this programme. Other concurrent workstreams include the Development Bank of Jamaica financing process for Tropical Renewable Energy, the Sygnus Capital extension completed in the prior period, and ongoing negotiations with institutional lenders. These are not isolated transactions — they are coordinated steps toward a balance sheet structure that is sustainable, efficient, and capable of supporting the Group’s next phase of growth.”