The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas is aiming to slash interest costs by up to two percentage points via its $100 million preference share restructuring, revealing to Tribune Business yesterday that its Florida and local growth initiatives are “on plan”.

The BISX-listed communications operator could potentially save hundreds of thousands of dollars in annual debt servicing costs via redemption of its $60 million Series 4 and Series 5 preference shares, which carry interest coupons of 8 per cent.

These will be replaced by $80 million in Series 6 preference shares, and documents seen by Tribune Business show these debt instruments will have a much lower interest coupon of 5.75 -6 per cent.

Anthony Butler, Cable Bahamas’ chief executive, confirmed to Tribune Business that the “net proceeds” from the $100 million preference share issues, set to launch on May 5, “will be used for working capital and general corporate purposes”.

“We’ve achieved strong financial and operational execution,” Anthony Butler, Cable Bahamas’ chief executive, told Tribune Business.

“We’ve grown revenue, we’re delivering healthy margins and generation on the cash flow.”

Explaining the rationale for Cable Bahamas’ latest capital raising, Mr Butler added: “The plan is to invest in growth initiatives and launching new products where applicable.

“We’ve a very comprehensive, balanced approach to growing market share in the Bahamas and Florida, and we believe our targeted initiatives, including new market expansion, will be vehicles for new revenue growth.”

Mr Butler declined to comment on whether the $20 million Bahamian dollar component will help to finance a bid for the second cellular licence, which will come into play post-April 6, 2014.

He added, though, that the integration of its four Florida businesses - Marco Island Cable, NuVu, US Metropolitan Telecom and Summit Broadband - both with themselves and Cable Bahamas - was “going very well”.

“We’re on plan for quarter one initiatives and integration, and pleased with what’s happening,” Mr Butler told Tribune Business.

Cable Bahamas is thus putting in place the capital structure promised following its recently-completed $100 million Florida expansion, while simultaneously exploiting the prevailing ‘low interest rate’ environment.

With Bahamian bank deposit rates as low as 2-3 per cent, the Cable Bahamas’ $80 million B$ preference shares will likely be viewed as offering much more attractive returns.

And, with plentiful liquidity (over $1 billion) in the commercial banking system, and no other major issues taking place in the Bahamian capital markets, Cable Bahamas is understood to view the timing as perfect given healthy investor appetite.

The BISX-listed operator and its financial advisor, RoyalFidelity Capital Markets, also believe they may raise more than the $100 million target.

They are able to ‘piggy back’ off Arawak Port Development Company’s (APD) summer 2013 preference share issue, which despite offering the “most competitive rate” in Bahamian capital markets history, was 71 pet cent oversubscribed at $36 million. The target was $21 million.

To go with the $80 million Bahamian dollar component, the balance of Cable Bahamas’ $100 million issue will consist of $20 million in US dollars.

This tranche, Series 8, will be priced slightly higher, at 6-6.25 per cent, with the proceeds financing the growth plans for Cable Bahamas’ newly acquired Florida operations.

And, likewise, the extra $20 million Cable Bahamas is planning to raise in local funds will be used to finance its operations and growth plans in the Bahamas.

Tribune Business exclusively revealed on Friday that Cable Bahamas was preparing to come to the Bahamian capital markets for financing, having sounded out key institutional investors, broker/dealers and financial advisers earlier this year.

Tribune Business also revealed that Cable Bahamas’ preference share issue was set to come to market in May, and documents seen by this newspaper confirm it will launch on May 5 via a private placement (members of the Bahamian public need not apply).

The issue will close on May 16, the date the Series 4 and Series 5 preference shares will be redeemed, with the new Series 6 tranche carrying a 10-year maturity to principal redemption.

A February 14, 2014, letter from RoyalFidelity to Series 4 and Series 5 investors makes clear that both it and Cable Bahamas are hoping they will roll 100 per cent of their existing investment into the new Series 6 shares.

And, to whet their appetite further, the letter adds that existing Series 4 and Series 5 investors will have first call, on a “first come, first served” basis, to both the extra $20 million in the Series 6 tranche and the US$20 million in the Series 8 class.

New subscribers will be admitted thereafter, with dividends paid semi-annually. Both the Series 6 and Series 8 preference shares will be listed on the Bahamas International Securities Exchange (BISX), and Cable Bahamas is understood to believe it does not need Central Bank approval to issue the US dollar component.

“The Board of Directors of Cable Bahamas has decided that, in the interest of preserving the current capital structure of the company, the company will issue $80 million Bahamian dollar Series 6 shares, $60 million of which will be used to replace the Series 4 and 5 Shares that are being redeemed,” the RoyalFidelity letter said.

“The balance of $20 million will be used for funding normal operating requirements. Each Series 4 and 5 shareholder will have the right to subscribe to the same principal amount of Series 6 shares as is being redeemed from the Series 4 and 5 Shares.”

It added: “Series 4 shareholders holding US$ Series 4 shares will have the right to subscribe to the same principal amount of a new series of US$ preference shares (Series 8 Shares).”

The minimum subscription is $1,000, or for 50 shares in both the Series 6 and Series 8 classes.

The Series 4 preference shares currently total $40 million in capital, and the Series 5 some $20 million.