The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s exit from its $70m majority ownership of Aliv has been delayed by the Cabinet’s desire for “clarity and comfort” on the chosen route.

Gowon Bowe, pictured, one of the advisers to the planned sale, told Tribune Business that Cabinet ministers had submitted “detailed questions that needed answering” on the private placement offering model that was originally selected as the Government’s exit route.

He disclosed that the queries had focused on whether a private placement to Bahamian institutional investors was “the only option” available to the Government, and how this “fits in” with the laws and regulations governing such offerings.

The Government would exit 51.75 per cent ownership in Aliv, the second mobile operator, by selling off HoldingCo, the vehicle that holds this equity stake, and Mr Bowe said the advisers were now awaiting “clear instructions to proceed” from the Minnis administration.

He added that the Government had been warned it can ill-afford to cause “confusion and ambiguity” among institutions already approached as potential investors, with lengthy delays also likely to cause a reduced appetite for participation.

Mr Bowe said he and fellow offering advisers would be “happy with [Cabinet] consensus”, and did not require unanimity, as they were ready to move “with haste” in placing HoldingCo’s shares once the go-ahead was received.

The Government inherited the private placement model from the Christie administration, which had given its approval to the structure pre-general election.

“Ultimately I think the Cabinet, whilst they had agreed to primarily on the same basis they had in place, a number of questions came out from them that they wanted comfort on,” Mr Bowe told Tribune Business.

“As they started to think about it, detailed questions came up that we had to answer. We said to them that given the question process we need clear instructions to proceed, because we can’t cause confusion and ambiguity with the people [investors] involved with this. We’ve approached them on one model and process.”

The structure agreed with the Christie administration was a private placement model, where HoldingCo’s shares would be sold to a targeted group of ‘sophisticated’ institutional investors.

Those institutions are the likes of Bahamian pension funds, investment/mutual funds and credit unions - entities covering thousands of members, and thus ensuring the broadest possible Bahamian ownership and spread of benefits.

Other ‘exit’ routes, such as an initial public offering (IPO), were rejected on the basis that Aliv, as a start-up operation that will incur initial heavy losses while it completes its infrastructure build-out, was not appropriate for retail (individual) investors.

This view has been met with some public opposition, and Tribune Business sources have suggested some well-placed government members were keen on an initial public offering (IPO). Mr Bowe said one Cabinet question was whether the private placement is “the only option available to them”.

“It’s been around providing the evidence and supporting details around the various options and considerations presented to the previous Cabinet,” he explained of the ‘question and answer’ moves. “They want to be clear how the chosen path fits in, and there are no other options around given the laws and regulations that exist.

“The original [Christie] Cabinet decision and instructions have not changed. It’s just the Cabinet wanted clarity and to be properly briefed. Whilst from a commercial and economic standpoint we’d like to be out the gate and doing the placement, we are respectful of the fact the Government is the shareholder and it’s in their prerogative to make sure they understand.

“It comes down to HoldingCo and the administration communicating so there’s clarity in purpose. There’s been no objection to the information feedback. It’s just making sure they have the answers to the questions they have.”

The Government’s investment in Aliv, via HoldingCo, was always intended to be temporary. It was made to ensure the new mobile operator had the necessary financing to get its operations off the ground, and was not delayed in meeting its infrastructure build-out and licensing obligations.

Its replacement by private investors, though, has been more than two years’ in the making. The Government’s exit was delayed by last year’s general election and, despite Prime Minister Dr Hubert Minnis’s confirmation early in his administration that it would see the process through, this has yet to occur.

The Government has already cited the HoldingCo sell-off, and potential reduction of its equity interest in the Bahamas Telecommunications Company (BTC), as two events that would help it achieve the objective of creating a ‘shareholder society’ and spreading wealth creation/accumulation more widely among Bahamians.

It also represents ‘low-hanging fruit’ for the cash-strapped Public Treasury, as the potential $70 million proceeds - if fully placed - will represent a major one-time cash injection that can significantly reduce an annual deficit currently exceeding $300 million. It will thus finally enable the Government to realise the fees paid by Cable Bahamas, Aliv’s controlling shareholder, for winning the licence.

“I will be happy with consensus; I don’t need unanimity,” Mr Bowe said of the Cabinet. “What we need, by consensus, is that everyone who is a decision-maker in this process, the Cabinet, understands this is the route being taken.

“We’ve articulated to them that the more time passes, the more anxiety comes about in terms of clarity on the road ahead. Once there’s confirmation of the original decision or instructions otherwise are sent out, we will mobilise with haste to get it done.

“A lot of the leg work has been done, more information [on Aliv] is available. The framework already exists, and the build-out of the structure is easy enough once everyone is of the same accord.”