The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas’s $100 million preference share issue was oversubscribed on its first day, but Bahamian institutional investors were yesterday urged to continue buying in as the company will “take what it can get”.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that the BISX-listed communications provider was “interested” in taking investor subscriptions in excess of its target $100 million.

He disclosed to this newspaper that the $100 million issue, which is effectively split into two tranches, was already oversubscribed “by about $1-$2 million” as existing and new investors sought attractive returns.

“I think we’re already oversubscribed as of yesterday on the Bahamian dollar component,” Mr Anderson told Tribune Business.

He explained that the $80 million Series 6 preference shares, which are denominated in Bahamian dollars, were already oversubscribed “by about $7-$8 million”.

However, the $20 million Series 8 tranche, which is denominated in US dollars, still has some way to go, with the RoyalFidelity president disclosing that around $8 million might still be available.

“The US dollar side is still undersubscribed, but we expect that to be slower,” Mr Anderson said. “I don’t think there’s the same level of interest in the US dollar side, so I think there may be $8 million still to go.

“I think that, overall, as of yesterday we were oversubscribed by about $1-$2 million, with the oversubscription on the Bahamian dollars and the undersubscription mainly on the US dollars.”

Mr Anderson said Cable Bahamas also might have to decide the split between the two tranches, and “mow much it wants to take of each currency at the end of the day”.

But he urged institutional investors, both new and those still holding the existing Series 4 and Series 5 preference share classes, to still subscribe to the offering.

“The [Cable Bahamas] directors have indicated their willingness to accept subscriptions over and above the offering amount. We’re going to take what we can get at the end of the offering,” Mr Anderson told Tribune Business.

“Investors should still come in if they’re interested, rather than not come in. Cable Bahamas would like to receive more. They haven’t set a limit to it, and are interested in taking more if that’s what they can raise.”

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 consists 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.

The offering’s performance to-date is trending in line with both RoyalFidelity and Cable Bahamas’s expectations, both companies having previously indicated to Tribune Business that they expected the private placement to be oversubscribed.

The secrets to the offering’s success are no surprise - a low interest rate, high liquidity environment and absence of rival investment opportunities with similar yields/returns, coupled with Cable Bahamas’ strong balance sheet and performance ‘track record’.

“It’s a good solid company people are contributing to,” Mr Anderson said, “with a great track record. Then there is the liquidity environment and good interest rate on a security in today’s market. These are the key facts as usual.”

The Cable Bahamas offering has also been able to ‘piggy back’ off Arawak Port Development Company’s (APD) summer 2013 preference share issue, which despite offering the “most competitive rate” in Bahamian capital markets history, was 71 pet cent oversubscribed at $36 million. The target was $21 million.

The $100 million preference share restructuring is 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, with most of the existing preference shareholders expected to roll over their investments into the Series 6 tranche and subscribe for more.

And 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.

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, Florida’s bottom line contribution is likely to grow from 20-25 per cent initially to 30-35 per cent of Cable Bahamas’ total earnings. Operating income margins as a percentage of revenue were forecast in the mid-40 per cents range.