The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

With more than $150 million worth of finance raisings set to come to market next year, a leading investment banker yesterday said 2013 could be “the best year ever” for the Bahamian capital markets.

But, while looking forward to next year’s prospects, Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, warned that a potential “negative” standing in the way was the Government’s need to finance its $550 million deficit.

Both the Christie administration and private sector will be competing for the same investors and capital pool, Mr Anderson explained, and this was raising concerns that market liquidity could be restricted in the 2013 second half.

Noting the direct link between investor and commercial banking sector liquidity, and the Bahamas’ foreign exchange reserve levels, Mr Anderson said that 85 per cent of all government borrowing typically leaked out overseas.

This is a general rule of thumb for the Bahamian economy, and the RoyalFidelity president told Tribune Business: “There’s an anticipation that if we can’t get better control over the deficit problem, that’s going to impact liquidity in the local market in the second half of next year, and will place some limits on what can be raised here.

“There’s this sense of liquidity getting potentially impacted later next year, which could lower liquidity in the local economy.

“It is one of the issues sitting out there. The Government has to come to the same market to try to raise its money. Notwithstanding the fact people want to raise capital, is there going to be sufficient liquidity in the system to meet all these requirements?”

Still, Mr Anderson described 2013 as shaping up to be “the largest year for many years in capital raising work”.

“We have expectations of money being raised in the market of $150 million, both equity and debt,” he told Tribune Business.

Among the upcoming finance/capital raisings already known about are the Public Hospitals Authority’s $55 million bond/debt issue, designed to replace the bank credit taken out for the Princess Margaret Hospital expansion; Arawak Port Development Company’s $35 million private placement, which will accomplish the same goal, and Cable Bahamas’ likely $30-$40 million preference share issue to finance its $65 million US expansion.

Those three issues alone add up to between $125-$130 million worth of capital, and Mr Anderson said the Bahamas Petroleum Company’s (BPC) Bahamian Depository Receipt (BDR) offering, plus another equity offering, were set to come to market for a combined $20 million.

“Add in the equities, and that’s $150 million already spoken about going to market next year without any other transactions,” Mr Anderson told Tribune Business.

He added that RoyalFidelity in 2011 placed $110 million worth of financing in the Bahamian capital markets, and said: “2011 was the last big year, when we raised $110 million.

“The $150 million is way in excess of that. It looks like a big year, particularly for transactions coming to market. It is the largest capital raising taking place for a long time, maybe ever, in terms of the capital markets.”

Tribune Business understands that Grand Bahama Power Company is also likely to come to market in the New Year with a $35 million debt offering, either bonds or preference shares.

Mr Anderson added: “The equity markets are slowly recovering, and the local economy is recovering slowly, even though there is high unemployment and this deficit.

“People investing in an economy try to take advantage of opportunities, and it’s a sign of growth. We expect it to grow the economy going forward.”