The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government can generate a desperately needed $70 million revenue windfall by "pulling the trigger" on its sale-ready majority interest in the Aliv mobile operator, Tribune Business was told yesterday.

Gowon Bowe, one of the Government's advisers, said the Minnis administration just needed to give the word to proceed with well-laid plans to sell-off the 51.75 per cent equity stake held by HoldingCo.

He explained that the former Christie administration had decided to delay the private placement of HoldingCo's shares to ensure its credibility was not undermined by political campaigning in the run-up to the general election.

HoldingCo's Board, and committee charged with arranging the private placement, "stand ready and waiting" to act on the Government's instructions to initiate the offering, Mr Bowe said, which would generate a much-needed cash injection for the Public Treasury given the Government's dire fiscal position.

He added that the success of Aliv's own bond offering, which was 100 per cent oversubscribed at $60 million, had "piqued" institutional investor interest in HoldingCo, especially given that this would lead to an equity interest in the Bahamas' second mobile operator.

As a result, Mr Bowe expressed optimism that the Government's full $70 million interest in HoldingCo would be acquired by private investors.

Explaining why the Government's exit from HoldingCo had suffered further delay, Mr Bowe told Tribune Business: "What had transpired is exactly that: The election.

"All the documents and trigger being pulled for the placement had been lined up, and then we went into the election cycle. The timelines and effort required were not a high priority for the previous administration."

He explained that the Christie administration "decided to defer to the end of the electoral process" the Government's exit from HoldingCo, so that campaign rhetoric did not overshadow or undermine the offering's prospects for success.

Meetings to determine the way forward on HoldingCo are planned with Prime Minister, Dr Hubert Minnis, and K P Turnquest, minister of finance, once the Government's 2017-2018 Budget is passed by the House of Assembly.

Mr Bowe said that while it was unclear where responsibility for communications, and cellular liberalisation, lay in the new Cabinet, HoldingCo's Board of Directors and placement committee are "standing ready and waiting to help the new government, and waiting to get their agreement to proceed".

"Simply give the go ahead," was Mr Bowe's response, when asked by Tribune Business what remains to be done with the HoldingCo offering. "I don't think there's anything to be revisited, and as long as the policy position doesn't change with respect to holding it........."

He suggested that a HoldingCo policy shift by the Minnis administration was unlikely, given its fiscal situation and desire to reduce the $429 million collective subsidy to state-owned enterprises (SOEs) by either privatising them or making them operate more efficiently.

Mr Turnquest, in his Budget presentation on Wednesday, appeared to question why the Christie administration had invested $70 million in Aliv via HoldingCo as he identified several SOEs that were failing to benefit the Government by not generating dividends.

Mr Bowe, though, reiterated that the HoldingCo investment was effectively a 'bridge financing' arrangement to ensure that Aliv's network roll-out was not delayed by the wait for private investors to come in.

Emphasising that the Government's exit was always planned, he said the Minnis administration would have been informed of this in the transition notes it received when taking office on May 11.

"The intention was never for the Government to be invested in a cellular holding company," Mr Bowe told Tribune Business. "That was a transitory arrangement, set out in the transition notes.

"They clearly demonstrate that is a temporary holding, set to be fully disposed of apart from any minority interest the Government may want to retain as an income asset."

Mr Bowe said the success of Aliv's own capital-raising, via its bond offering earlier this year, had generated renewed interest among the pension funds, credit unions and mutual funds that were being targeted by HoldingCo and its advisers.

"The successful bond offering Aliv had has piqued interest in this placement, and people are seeing they have a unique opportunity to be in HoldingCo, as its asset is Aliv. It gives them equity participation, which the bond doesn't," he told Tribune Business.

Mr Bowe said HoldingCo's equity will be sold "in two tranches if necessary, but we believe it will all be picked up".

He suggested the HoldingCo placement was likely one of the quickest ways for the Government to generate a significant one-off cash flow, and aid its bid to keep the 2017-2018 fiscal deficit below the $323 million outlined in the Budget.

"The Government, given that it's on a cash basis of accounting, any proceeds coming in will be unbudgeted revenue, and that will have a positive impact on the fiscal performance for 2017-2018," Mr Bowe said.

Should the full HoldingCo private placement be taken up, the $70 million raised would, for instance, match the $70 million demand by the Government's lenders for extra loan security by the first week of July after the 'junk' downgrade by Standard & Poor's (S&P) placed it on the wrong side of a derivative transaction.

The $70 million generated by selling-off HoldingCo would also enable the Government to, finally, realise the proceeds from the $62.5 million spectrum license paid by Cable Bahamas. Those funds were immediately injected back into Aliv as HoldingCo's share of its infrastructure build-out costs.

HoldingCo holds the majority 51.75 per cent equity stake in Aliv, with Cable Bahamas owning the remaining 48.25 per cent. The BISX-listed communications provider has Board and management control.

HoldingCo was initially conceived as a vehicle that would pool Bahamian capital for investment in a variety of infrastructure-based developments throughout the country, with Aliv designed to be just its first holding.

The institutions eyed as its first investors have been targeted because they represent the broadest possible spectrum of Bahamian ownership through their members.