The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE GOVERNMENT is “very confident” that its guaranteed $250 million Bahamas Electricity Corporation (BEC) bond issue will be fully suscribed, a Cabinet Minister said yesterday.

Michael Halkitis, minister of state for finance, told Tribune Business: “The bond will carry a government guarantee, which still makes it attractive. The bankers will shop it to their clients so we have no worries.”

He reiterated that there was no new borrowing or new capital coming into BEC, but rather the bond would consolidate and pay out existing loans.

The Government on Wednesday said the planned $250 million bond was “the first step to rehabilitate” BEC’s financial position.

According to Mr Halkitis, the US dollar-denominated financing, which will be raised via a private placement managed by CIBC FirstCaribbean, is intended to replace short-term bank debt with long-term financing.

The bond, which is set to have a 15-20-year maturity, depending on investor appetite, will refinance and pay out two existing loans held by BEC.

The first, a $211 million syndicated loan, was due to mature in October 2012, indicating it must have been extended, while another $35 million loan - required to finance BEC’s fuel purchases from Shell Western - will also be paid out.

The latter loan was provided solely by CIBC FirstCaribbean, while the same bank organised the original syndicate, which included Scotiabank (Bahamas), Butterfield Bank, Bank of the Bahamas, the National Insurance Board and Royal Bank of Canada.

Acknowledging that it was “unsustainable” for BEC to continue borrowing to cover ordinary expenses, Mr Halkitis told the House of Assembly on Wednesday: “The overall goal of the Government is to reduce the non-fuel costs of electricity - operational, maintenance and administrative expenses passed on to consumers - and to reduce the variability of fuel prices through various methods of pricing and fuel conservation.

“The first step on this journey is this initiative, which is a refinancing of existing debt to have better, more predictable cash flow and better financial planning. It is extending the term of the loan to have better cash flow, and beginning some of the objectives to reduce operating costs.”