The Tribune

The Public Hospitals Authority's (PHA) $25 million bond issue closed slightly oversubscribed, its financial advisers estimating that between $26-$27 million has been raised from investors.

Michael Anderson, RoyalFidelity Merchant Bank & Trust's president, told Tribune Business that the offering had met his forecast that between $25-$30 million would be raised.

"I'm not sure what the final total is going to be because we're still speaking to various clients," Mr Anderson told Tribune Business minutes before Friday's closing deadline, "but we're around $26-$27 million.

"It'll be somewhere around that position. It's slightly higher than what we went out for. I expected to get between $25-$30 million, and I'm happy with where we got to."

The $24.65 million net proceeds from the bond offering will be used for one purpose only - to help repay Royal Bank of Canada's (RBC) $55 million loan that financed construction of Princess Margaret Hospital's (PMH) Critical Care Block.

Mr Anderson said the issue had been aided by the "high level of liquiity in the market", coupled with the low interest rate environment, which is continuing to drive investors to seek higher returns than those available on bank deposits.

He conceded, though, that it was impossible to predict with certainty how much any capital markets issue might raise. Some investors who promised to buy in never did, or did so for smaller amounts than initially indicated.

"We never go out to market without some sense of what to expect," Mr Anderson explained, adding that RoyalFidelity always performed pre-offer "reads" that assessed rates and investor appetite.

"We try and put it altogether and come up with a best position of what the offering will come to," he told Tribune Business. "It's hard to really gauge, as people do not always do what they say they're going to do.

"Some people come in for more, some for less, and it's hard to get it accurate. We're always happy when we get the judgment relatively accurate. It's nice to have a bit more than a bit less."

The latest PHA bond issue will not be listed and traded on the Bahamas International Securities Exchange (BISX), with the Government having provided a 'Letter of Support' for the Authority's obligation to make due interest and principal payments on the notes.

The offering document also confirms that the PHA is reliant on the Government's financial support for its continued existence.

"The Authority continues to operate at a deficit, and financial support from the Government is essential for the continued operations of the Authority," the 'investment risks' state. "While such funding from the Government is expected to continue, the level of funding is not guaranteed."

Tribune Business revealed last Thursday how the PHA was running a $73.179 million accumulated deficit at its 2013 financial year-end, while its current solvency deficiency grew by 54.4 per cent year-over-year.

“Without qualifying our opinion, we draw attention to Note 21 to the financial statements, which indicates that as at June 30, 2013, the Authority’s current liabilities exceed its current assets by $28.77 million (2012: $18.628 million) and that it has an accumulated deficit of $73.18 million,” Baker Tilly Gomez, the PHA's external auditors, said in the 2013 year-end report.

“These conditions, along with other matters as set forth, indicate the existence of a material uncertainty which may cast significant doubt about the Authority’s ability to continue as a going concern without the continued financial support of the Government of the Bahamas.”

The financial statements, though, were prepared on a ‘going concern’ basis because there was no suggestion that the Government would fail to support the PHA and cover its debts.

It is the intention of the Government to continue to financially support the Authority as a going concern due to its role in the management of the Government-owned hospitals and delivery of health care,” the 2013 accounts said.

“The Authority continues to operate at a deficit, and financial support from the Government is essential for the continued operations of the Authority.”

No financial statements have yet been produced for the PHA's 2014 financial year, and Tribune Business understands that the 2013 version was only recently signed-off by Baker Tilly Gomez.

The Series B bonds involved in the latest PHA bond offering carry a 6 per cent interest coupon, and pay out to investors on a bi-annual basis, with the first payment set to be made on March 31, 2016.

The offer is set to close tomorrow, Friday, December 11. Investor subscriptions will be allocated on a ‘first come, first served’ basis, in a bid to generate investor demand, as the earlier they come in, the greater the chance they will receive 100 per cent of their requests.

Investor principal will be repaid in 18 equal annual instlaments, beginning on September 30 next year and carrying through to 2033.