The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Aliv and its majority shareholder were yesterday said to be co-ordinating their respective capital raisings to ensure they will “not cannibalise” each other, with both looking to close in the 2017 first quarter.

Gowon Bowe, one of the Government’s advisers on the HoldingCo share placement, told Tribune Business that Aliv had greater “flexibility” to target a wider range of potential investors for its $30 million debt offering.

HoldingCo, the entity that holds the majority 51.75 per cent equity stake in Aliv’s operating company, NewCo, is instead seeking to sell 100 per cent of its equity to Bahamian institutional investors via a private share placement.

While acknowledging that HoldingCo may be targeting some of the same potential investors as Aliv, Mr Bowe said the former was restricted to focusing on the likes of pension funds, mutual funds and credit unions.

This is due to the Government’s position that HoldingCo’s initial shareholding be as diverse as possible, so that the maximum number of Bahamians benefit, as it seeks to exit itself from the company.

“They’re not the same instruments, but they will be going after probably some of the similar sources,” Mr Bowe told Tribune Business of the planned Aliv and HoldingCo capital raisings.

“It’s already been agreed between the two entities, so they will not be cannibalising each other. Aliv has the flexibility that they can target high net worth individuals, institutions and money market opportunities, whereas we have to meet the requirements of broader ownership.

“In addition to what we’re doing, it’s making sure we understand what Aliv’s lined up as well, and making sure the parties are not shying away from the other in terms of the timing,” he added.

“There’s co-ordination of the capital market players so that there’s understanding of what’s coming at this point in time. We’re still in the timeline of trying to get it done in the first quarter, so we’re making sure all these things are aligned.”

Mr Bowe also pointed to the differences between what is being offered to investors, with Aliv focusing on either bonds, preference shares or bank financing to meet the agreed debt component of its capital structure.

While Aliv’s debt capital would have a shorter lifespan, a fixed-coupon rate of return and be cheaper, the HoldingCo equity placement will deliver returns over the long-term.

Still, the demands on investors and the wider Bahamian capital markets will be great, given that two offerings of significant size will be presented at around the same time.

Tribune Business previously reported that HoldingCo was seeking to raise around $70 million as its share of Aliv/NewCo’s initial financing. When added to the $30 million that Aliv is seeking, this means that a total $100 million is being sought - a sum greater than has been raised in any previous capital raise - the maximum currently is around $60-$70 million.

However, Mr Bowe said investor appetite was likely to have been increased by the Central Bank’s pre-Christmas decision to slash the Discount rate by 0.5 percentage points to 4 per cent.

This has meant that investor returns on bank deposits, and existing securities issues whose prices (interest rates) are linked to Bahamian Prime, will have fallen.

The reduced yields from “a low interest rate environment”, coupled with limited investment opportunities in the Bahamian capital markets, are being counted on to stimulate investor interest in the planned offerings from the nation’s second mobile operator and its majority shareholder.

Mr Bowe said HoldingCo had completed its ‘soundings’ of potential investors, and was now working to finalise the private placement document and structure of the offering.

“We’ve got the feedback from many of those targeted, and we’re now near completion of the final document and final opening and closing [of the offering],” he told Tribune Business.

“We’re assessing where we are in terms of the amounts committed now, and will then determine the strategy as to whether in the future it remains open and available for investors to pick up at a later date. And, if there’s a shortfall or excess, what to do.”

HoldingCo has been assessing whether it can accommodate the ‘cash flow’ needs of some potential investors, who have said they are willing to make a greater investment if the offering remains open for a longer period, thus enabling them to make a second capital contribution.

The placement of HoldingCo’s shares is designed to secure the Government’s complete exit from ownership of the company.

The Government has temporarily taken 100 per cent ownership of HoldingCo to ensure NewCo/Aliv is not delayed in obtaining the necessary financing to meet its infrastructure roll-out objectives, with the intention that it quickly be bought out by private Bahamian institutional investors. Securing this ‘buy out’, though, has been harder - and taken longer - than the Government and its advisers thought.