The Tribune

This newspaper can confirm that CIBC FirstCaribbean International Bank and Credit Suisse are working to raise the funds, which will be used to finance the purchase of Bahamasair's new fleet and provide some working capital for the cash-strapped airline.

The financing is taking place amid some confusion, and seeming tension, over whether the national flag carrier or the Ministry of Finance has primary responsibility for the matter.

Tribune Business was on Friday passed back and forth between Bahamasair and Ministry of Finance officials in trying to confirm the financing's details, with each insisting the other was better placed to speak to the issue.

Henry Woods, Bahamasair's managing director, declined to comment and referred Tribune Business to the Ministry of Finance.

However, Simon Wilson, the Ministry's deputy financial secretary, then told this newspaper to speak to either Bahamasair or CIBC FirstCaribbean.

But Deputy Prime Minister, Philip Davis, responded to Tribune Business's inquiries with this e-mail: "The Ministry of Finance is handling this aspect of the transaction, and they will be in a better position to speak to specifics."

Valentine Grimes, Bahamasair's chairman, simply responded via e-mail that he was "in New York", implying that he was unable to speak on the issue.

Tribune Business sources familiar with the Bahamasair financing, though, were able to confirm the details and the series of events leading up to the $120 million financing.

They told this newspaper that the national flag carrier initiated the process over six months ago by sending out a tender document to potential financiers.

However, multiple contacts suggested that the Ministry of Finance ultimately took over the process, wanting to ensure that Bahamasair both obtained the best possible deal and that it fitted in with its overall fiscal plans.

One banker, who saw the initial Bahamasair financing request for proposal (RFP), confirmed that the airline was seeking a US dollar facility.

"We looked at it, and couldn't figure out how we were going to participate," they said.

A source close to Bahamasair confirmed that the airline initiated the RFP, and responses were received from eight financial institutions. These were subsequently whittled down to a three-strong 'shortlist', from which emerged the CIBC-Credit Suisse consortium.

"Bahamasair, more than half a year ago, put out the RFP," the source added. "But the selection of the credit facility is totally the Ministry of Finance's. Bahamasair had no part in it."

John Rolle, the Ministry of Finance's financial secretary, told Tribune Business he was aware of the Bahamasair financing although he did not know all the details.

"It is at least $100 million," he said. "I expect Bahamasair will be able, before the end of the month, to disclose what final arrangement it has come to.

"I think they have to get final approval from the Government yet. I am not aware that it has been completed yet."

Mr Rolle gave no indication of whether the $120 million financing would require a government guarantee, and thus add to the existing $6.4 billion national debt.

A Government guarantee would normally be a certainty in Bahamasair's case, given that the cash-strapped flag carrier has never been profitable and has accumulated more than $500 million in losses that have had to be carrried by the Bahamian taxpayer.

However, a source familiar with the financing's structure said such a guarantee may not be necessary with the current financing.

They suggested that ATR, the manufacturer of Bahamasair's six new planes, had been able to obtain an export credit guarantee from the French government, or a financial institution it owned, to part underwrite the sale.

The source added that this guarantee had reduced the risk associated with the Bahamasair transaction, making it more attractive for the financial institutions.

Bahamasair has ordered 2 ATR 72-600s and 3 ATR 42-600s,the first of which arrived in the Bahamas earlier this month. The five planes in total cost $100 million.

The two ATR 72-600s have a 70-seat capacity, and the other three planes can carry a maximum of 50 passengers.

The 70-seat models will service high-density routes such as Nassau to Freeport to Fort Lauderdale, and Nassau to Marsh Harbour to West Palm Beach.

Mr Grimes said previously: “Overall, this new fleet of aircraft will improve service and reliability, thereby enhancing the customer satisfaction.

"It will reduce maintenance costs significantly over the next three years, reduce fuel consumption, saving costs and will reduce or eliminate dependency on sub services.”