The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The $45 million Public Hospitals Authority (PHA) bond issue has been postponed for one week to allow time for government approval, Tribune Business can reveal.

Sources familiar with the situation said the long-awaited private offering, which had been due to launch today, had been delayed to give the Christie administration time to approve the ‘Letter of Support’ that will underpin the issue.

Bahamian broker/dealers, pension and investment fund managers, and large institutional investors were informed of the delay last week via an advisory issued by the PHA’s placement agent, Royal Fidelity Merchant Bank & Trust.

The e-mail advisory warned that “the planned offering has been deferred by one week”, and is now expected to launch on Monday, October 28. The PHA offering document will be issued by this coming Friday.

Tribune Business inquiries indicated the week-long delay stems from the need for the Government to approve the ‘Letter of Support’ that will accompany the offering documents issued to potential investors.

This is effectively the Government guarantee, meaning that it will underwrite the offering and promises to ‘make good’ the interest and/or principal payments due to investors. Such a guarantee is necessary given the PHA’s parlous financial state, as without it potential investors will likely harbor serious doubts about the Authority’s ability to repay them, and may not buy in.

“The prospectus will be out by the 25th. Cabinet wanted to approve it,” one source told Tribune Business of the ‘Letter of Support’, implying that this was the reason for the PHA offering delay. It is understood that the Government has to approve its wording, but it is unclear whether Parliament’s approval is required, too.

Still, the ‘Letter of Support’ means that the $45 million raised through the PHA issue will be added to the Government’s ‘contingent liabilities’ that already total around $600-$700 million. The guarantee means that the $45 million will be added to the National Debt.

With almost $1.1 billion in excess liquidity (surplus assets in the commercial banking system looking for an investment home), and Bahamian capital markets demand for fixed-income securities exceeding supply, the PHA issue is thought likely to be oversubscribed.

The offering, which Tribune Business understands will be bonds as opposed to preference shares, was initially going to be $55 million.

Sources told this newspaper that the proceeds will be used to “take out” the Royal Bank of Canada (RBC) loan that financed construction of Princess Margaret Hospital’s (PMH) new Critical Care Block.

The PHA offering is a private placement, targeted at institutional investors such as pension funds and insurance companies, plus high net worth individuals. It is not a public offering, and members of the Bahamian public should not apply.

The $53 million PMH Critical Care Block is scheduled to be handed over to the PHA, complete, this month.

Its main contractor is Cavalier Construction, which in July estimated that between 700-800 Bahamian construction workers had been employed on the project. Some $20 million worth of medical equipment is to be installed in the Critical Care Block.