The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas is forecasting that net income will increase by 130 per cent over the next five years as a result of its Florida expansion, with its US interests ultimately accounting for one-third of its bottom line.

Barry Williams, the BISX-listed communications provider’s senior vice-president of finance, confirmed to Tribune Business yesterday that the company’s $100 million preference share restructuring - set to launch on Monday - would be the largest ever issue in the Bahamian capital markets.

This newspaper understands that the capital raising, once completed, will make Cable Bahamas the largest issuer of privately-held debt in the Bahamas, and Mr Williams expressed optimism that the placement would be fully subscribed.

In its five-year financial projections to 2018, published this week, Cable Bahamas is forecasting that aided by its four Florida acquisitions, and their rolling into one at Summit Broadband, net income will more than double from $15.375 million this year to $35.399 million come 2018.

Of greatest interest to Bahamian shareholders will be the earnings per share (EPS), which will go from a projected $1.13 this year to $2.60 in 2018 - and the possibilities this entails for dividend payments.

With the Bahamas a relatively mature, low growth market apart from cellular opportunities, Mr Williams said Florida’s bottom line contribution was likely to grow from 20-25 per cent initially to 30-35 per cent. Operating income margins as a percentage of revenue were forecast in the mid-40 per cents range.

Tribune Business revealed last year that Cable Bahamas could potentially save hundreds of thousands of dollars in annual debt servicing costs via redemption of its $60 million Series 4 and Series 5 preference shares, which carry interest coupons of 8 per cent.

These will be replaced by $80 million in Series 6 preference shares, and documents seen by Tribune Business show these debt instruments will have a much lower interest coupon of 5.75 -6 per cent.

To go with the $80 million Bahamian dollar component, the balance of Cable Bahamas’ $100 million issue will consist of $20 million in US dollars.

This tranche, Series 8, will be priced slightly higher, at 6-6.25 per cent, with the proceeds financing the growth plans for Cable Bahamas’ newly acquired Florida operations.

Mr Williams yesterday told Tribune Business that Cable Bahamas had received strong indications the majority of its existing Series 4 and Series 5 preference shareholders would elect to roll their investments over into the Series 6.

“The read we have been receiving is that the majority of the holders are going to roll,” he said. “I’m only aware of two to three that may redeem.

“We certainly have indications, if we can gauge it from the interest we have been getting, that a lot of the existing shareholders are taking an additional position beyond what they currently have, and the read also indicates there could be quite a number of new shareholders as well.”

Expressing optimism that the $100 million capital raising would be fully subscribed, Mr Williams added: “The response we’ve been getting, and interest seen, is very, very good, and I’m anticipating it will be very, very successful.

“We’ve been telling the existing shareholders, and potential ones, to get their subscriptions in early as they’re going to be allocated on a first come, first served basis.”

With $60 million of the $80 million Bahamian dollar component largely already spoken for, Cable Bahamas will likely be aided by a combination of high system liquidity and the prevailing low bank deposit/interest rate environment. This makes the preference share coupons look especially attractive to investors.

Mr Williams described the offering’s size as “significant and material” to Cable Bahamas, adding: “We don’t focus on blowing our own horn on these things, but what you are saying is correct (in terms of issue size).

“We’ve had a number of firsts in the Bahamas, and we’d like to think our track record speaks for us on what we can accomplish and how successful we are.”

Mr Williams added that listing the preference shares on the Bahamas International Securities Exchange (BISX) would boost liquidity for investors, enabling them to trade the securities, while also aiding the exchange.