The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas and its shareholders are ‘on the hook’ to lose almost $8 million if the Government refuses to approve the company’s acquisitions of three Florida-based communications providers.

The extent of the BISX-listed company’s exposure is detailed in its just-released full-year 2012 financial statements, which disclose that it is now into its ninth month of waiting for the Christie administration to give a formal go-ahead for $89 million worth of deals.

Cable Bahamas’ financials confirm what Tribune Business has long been told: That the company is exposed to substantial, multi-million dollar ‘break-up fees’ if the three purchases do not go ahead.

As at May 30, 2013, the date when directors signed off on the audited financial statements, Cable Bahamas had paid a total $5.933 million in “non-refundable deposits” to its acquisition targets.

And a further $1.921 million has been spent by the BISX-listed company on costs related to the purchases as at that date.

In total, Cable Bahamas - and its hundreds of Bahamians investors - have $7.854 million at stake in its Florida expansion plans.

That sum is equivalent to 36.4 per cent of the company’s 2012 full-year profit of $21.561 million, and would represent a major, unrecoverable loss for Bahamian shareholders if government approvals are not forthcoming.

The Cable Bahamas financials confirmed that approval had still not been received from the Christie administration as at May 30. The required permissions are likely still outstanding, as the company would have been required to issue a formal statement had these been forthcoming and the deals closed.

When contacted by Tribune Business for comment, Anthony Butler, Cable Bahamas’ president and chief executive, said he was in a meeting and unable to talk. He added that he would call this newspaper back at around 6pm last night, but no call was received.

Referring to the initial $65 million purchase of Summit Broadband and Marco Island Cable/NuVu, which was followed by the $24 million deal for US Metropolitan Telecom, the Cable Bahamas’ financial statements said: “In October and December of 2012, the company signed agreements to purchase four Florida-based communications companies that currently provide cable television, broadband, telephony and data services.

“At March 30, 2013, all US required regulatory approvals, including approvals from the Federal Communications Commission, were received. Application for required Bahamas regulatory approvals was submitted in 2012, but were still pending as at the date of approval of these financial statements.”

Cable Bahamas requires exchange control approval to pay for its acquisitions. Tribune Business was told that the Central Bank of the Bahamas had done everything required, but the ‘missing ingredient’ remains the Government’s literal ‘stamp of approval’ on the documents.

This, of course, has to come from the Investments Board, which is either the Cabinet or a sub-committee of Cabinet.

The Cable Bahamas financial statements add: “Included in Investments is $2.325 million of non-refundable deposits paid in 2012, which will be applied to the purchase price of the acquisitions on closing, which will occur on receiving Bahamas government approval.

“Additional non-refundable deposits totalling $3.697 million were paid in 2013.”

And they added: “All other costs and expenditures related to the acquisitions incurred in 2012, totalling $1.468 million, are included in operating expenses in the consolidated statement of comprehensive income.

“Additional costs incurred in 2013 total $453,086, and will be expensed in 2013.”

While top Cable Bahamas executives have declined to comment publicly on the situation, Tribune Business understands that their frustration at the Government’s seeming inability to approve the purchases is increasing.

Each passing day increases the likelihood that one or all the deals will fall through, and Cable Bahamas will be exposed to the substantial multi-million dollar break-up fees.

What is understood to be especially puzzling for Cable Bahamas ‘ directors and management is the fact the company is 100 per cent Bahamian-owned, and one of the few seeking to expand beyond this nation’s borders.

Yet despite the potential benefits to both its investors and the wider Bahamas, and being in accord with something successive governments have championed, it finds itself held back by this nation’s lengthy, bureaucratic approvals processes.

Commenting on the situation, one Cable Bahamas shareholder, speaking to Tribune Business on condition of anonymity, said: “It would be rather silly if they [Cable] spent all that money and were not assured of approval. I wouldn’t like to be at that shareholder’s meeting.”

For its part, the Government has not explained - yet - why the approvals process is taking so long, or what, if any, concerns it has about Cable Bahamas’ potential acquisitions.

Meanwhile, the notes to Cable Bahamas’ financial statements also revealed that the company has received a “short-term” $5 million loan from an unnamed Board director.

The nature and purpose of the loan was not disclosed, and further details could not be obtained. Barry Williams, Cable Bahamas’ senior vice-president of finance, did not return messages left for him by Tribune Business before press time.

The financial statements, though, said: “In April of 2013, the Board approved for the company to receive a short-term loan from a director in the amount of $5 million.

“Interest and exchange costs on the loan of $285,000 is payable, along with the principal, on June 20, 2013. The loan is unsecured and subordinate to the senior secured credit facility.”

The dividend paid by Cable Bahamas to shareholders on March 29, 2013, was collectively worth $1.359 million.