The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas was "staring a very dark future in the face" until it stunned the capital markets by revealing its $332.5m US exit, a prominent businessman said yesterday.

Sir Franklyn Wilson, who first made public his concerns about the BISX-listed communications provider's financial health three years ago, told Tribune Business that the returns from selling its Summit Broadband unit were "truly, truly amazing".

Arguing that there was "legitimate concern" over Cable Bahamas' future prior to the deal's announcement, Sir Franklyn said this highlighted why the company's move is "so significant".

He added that "nowhere in this world did I ever dream" such proceeds would be realised from selling the Florida business, and suggested that even Cable Bahamas' Board and management were "themselves pleasantly surprised" at securing a purchase price almost three-and-a-half times the $100m paid for the four entities that were amalgamated into Summit Broadband.

"Isn't that a huge deal for Cable Bahamas?" Sir Franklyn said. "This is truly, truly amazing. Truly, truly amazing. The first factor is that the sales price is $333m. That doesn't happen in The Bahamas involving a Bahamian company as the lead investor. That's not a common occurrence."

"Cable Bahamas, outside of this deal, it was difficult to see just from a pure analysis of the financials how that company was not staring a very dark future in the face. The level of debt and losses, if you just did a clinical analysis of the numbers, that was a matter of grave concern."

Cable Bahamas has come under increasing pressure from some shareholders, especially small retail investors, over the suspension of dividend payments and two consecutive years of $50m-plus comprehensive losses.

Besides the loss of investment returns and scale of the "red ink" over the past four financial years, shareholders had also started to fret over the $442m in long-term debt that the company was carrying on its balance sheet at end-March 2019.

Sir Franklyn yesterday said Cable Bahamas' woes had threatened to create "major public policy implications" given that the company's largest equity shareholder is the National Insurance Board (NIB), the national social security system, which holds a 21.6 percent stake.

The Arawak Homes chairman added that NIB was also a major investor in Cable Bahamas' near $250m preference share debt, and said: "One of my reasons for staying close to that was the implications for public policy and NIB - if Cable Bahamas floundered to the point where its future [was questionable] - would be difficult to under-state".

Praising Franklyn Butler, his godson and Cable Bahamas chief executive,"for pulling this thing off", Sir Franklyn also hailed Ross McDonald, the company's chairman, and other advisers, Board and management members for securing the Summit Broadband sale.

"It's clear that since Ross became chairman there that the culture of Cable Bahamas has changed," Sir Franklyn added. "If you look at Cable Bahamas' old annual reports there seemed to be more emphasis on glitz and spin than credible analysis.

"I think this is a very significant day for the capital markets in The Bahamas because of the size of the deal, the significance of the company, the players involved, and what it says for when a company is run properly. It's a wonderful story. This is a magnificent day for the country. I don't see any negative in this.

"Everyone involved deserves the highest possible commendation. I've said to Ross McDonald and Franklyn Butler that Cable Bahamas will become a wonderful case study for students at the University of The Bahamas going forward."

Sir Franklyn has harboured long-standing concerns over Cable Bahamas' welfare. Tribune Business revealed in 2016 that he had even circulated a "discussion paper" to capital markets participants outlining his issues with the company's financial position, and expressing concerns about various aspects of its operations.

In particular, the Sunshine Holdings chairman detailed fears that the BISX-listed communications provider was over-leveraged and had taken on too much debt via preference share issues that had raised over $200m in debt capital.

Similar worries have been on the minds of many Cable Bahamas shareholders in subsequent years, with the company's total long-term debt at end-March 2019 consisting of $286.306m in preference shares and $155.861m in bank debt. Proceeds from the Summit Broadband sale will almost inevitably be used to now pay down this debt burden.

"Throughout my concerns I was always involved with the leadership at Cable Bahamas, and all knew of my concerns," Sir Franklyn said yesterday. "I sought to express them in a non-adversarial way, and I'm thankful they regarded it as constructive.

"There was no doubt when you looked at the numbers that there was a lot to be concerned about. That's what makes this more significant..... The timing could not be better. Without this the future of Cable Bahamas would be a matter of legitimate concern.

"In fact, nowhere in this world did I ever dream this would happen. I have reason to believe the management themselves were pleasantly surprised. This speaks to the professional way they went about it and established value."

Franklyn Butler, Cable Bahamas chief executive, told Tribune Business on Monday that the "fantastic deal" involving Summit Broadband will "unlock real value" for Cable Bahamas shareholders less than six years after it entered the Florida market.

With "just over" $200m invested in that overseas expansion, comprising capital expenditure and the $100m purchase price for the four entities that were ultimately combined to form Summit Broadband, the BISX-listed communications provider is effectively eyeing a nine-figure profit between $100m-$130m on the deal.

The Summit Broadband sale to Grain Management, a US-based private equity firm specialising in the communications industry, will effectively give Cable Bahamas a financial "war chest" with which to secure its future and lay the platform for further growth and development once the deal closes in the 2019 fourth quarter.

Sir Franklyn, though, warned other Bahamian companies about seeking to emulate Cable Bahamas' example by engaging in overseas expansion of their own. "I would caution locals to be careful about 'me too'," he told Tribune Business.

"The fact this has happened does not mean it is easy to achieve. It's a very difficult thing. It does provide some useful lessons that, if things are done with an appropriate degree of sophistication and meet world standards, certain things are possible. I don't want people to think this is easy."