The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas’s financial adviser yesterday expressed “disappointment” that institutional asset managers had failed to deliver on indications they would place between $10-$18 million US dollars into the company’s private placement, having invested a paltry $100,000 to-date.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that the BISX-listed communications provider’s preference share issue, which closes today, was still expected to end up oversubscribed with between $105 million to $110 million raised.

This, though, will be due entirely to capital raised via the $80 million Bahamian dollar portion of the offering, with Mr Anderson estimating that Cable Bahamas will finish between $8-$10 million short on the US dollar component.

The US dollars were intended to provide working capital for Cable Bahamas’s newly-acquired foreign operations, and it is unclear what impact any shortfall may have as Barry Williams, the company’s senior vice-president of finance, did not return Tribune Business’s calls seeking comment.

Still, Mr Anderson said some $55 million of the existing $60 million Series 4 and Series 5 preference shares was expected to ‘roll over’ into the new Series 6 class, with Cable Bahamas having already confirmed it would take the extra Bahamian dollar subscriptions.

The RoyalFidelity president added the extra $50 million raised over and above the existing $60 million preference shares was proof that the bar on Bahamian domestic capital raisings had increased from the $20-$30 million ceiling it was at some 10-15 years ago.

Still, there was little disguising Mr Anderson’s disappointment that many institutional money managers had failed to come through on what they had previously indicated would be the likely level of US dollar subscriptions.

“We still expect to end up between $105-$110 million in total subscriptions,” Mr Anderson told Tribune Business. “We still have less US dollars than we would have liked, but we’ve got a lot more Bahamian dollar subscriptions than we set out to get.

“The company indicated they would accept more Bahamian dollars, so they’ve effectively taken the amounts raised so far. I just wish we had more US dollars than we have. We’re happy with the level of participation, and just wish there’d been a higher level of participation on the US side.”

And the RoyalFidelity president added: “The disappointing aspect was the early indications we had from broker/dealers and investment managers on the US dollars was for between $10-$18 million, and to-date we’ve got $100,000.

“You look at it, and say: ‘Why is it that people say yes, they will come out and raise this money, and we end up with nothing?’ Indications in some places tend to be a little closer to reality than they are here.

“When you set out to do these offerings, it’s better when you have indications of the level of interest, but in this and other ones they tend to be fairly misleading.”

Mr Anderson said the Cable Bahamas’ preference share issue was likely to close “somewhere between $8-$10 million” on the US dollar component, between 50-60 per cent short of its target. Around $9 million had been raised as of yesterday.

Acknowledging that Bahamian investment managers often did not have “direction over the assets”, with clients having the final say over where their money goes, Mr Anderson added that US dollar capital raising in the Bahamas was “always difficult”.

He explained that this was because US dollar owners had “many options” when it came to investing, and were not restricted to the Bahamas.

“There’s a limited amount of US dollars available in this market, and you don’t know what the options are,” Mr Anderson said.

He added that with $50 million of new investor monies buying into the Cable Bahamas private placement, the extra sum raised represented a “credible amount”.

“That’s what we think a typical raise could achieve; $50-$60 million,” Mr Anderson told Tribune Business of investor appetite for capital markets offerings. “We’ve not seen a raise over that.

“The market is more liquid, but that does not necessarily mean people move out of bank deposits. There seems to be this point, this range, up to $50-$60 million in the market and not much more capacity.

“But compared to 10-15 years ago, when the capacity was $20-$30 million, we’re way ahead of the game. Raising $10-$15 million was a big deal then.”

Mr Anderson said the low interest rate environment and small bank deposit returns were helping to change investor attitudes to the Bahamian capital markets, and stocks and corporate debt, but the Bahamas still had a long way to go.

“The mindset has become much more involved in the capital markets to the extent of capacity to provide more money, but it’s [the markets] still a relatively small proportion of the overall assets in the country,” he told Tribune Business.

“The majority of the money is sittingh in government debt or bank deposits. Playing in the private sector capital markets is still a relatively new opportunity for most people, but there is a growing awareness that brings some money to the table.”

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.