The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s new debt security will attempt to cross the $200 million “finish line” next week when the final $55 million tranche comes to market, its placement agent yesterday expressing optimism that it will be “well received”.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that the $55 million represented the ‘final piece’ of the $200 million that the Government wants to raise from its Bahamas Government Stock (BGS) security during the 2014-2015 fiscal year.

Term sheets for the 48-hour offering, which will take place on June 17-18, have just been issued to institutional investors and their financial advisors, and Mr Anderson said he anticipated another strong response similar to the two earlier BGS issues.

“Like the other ones, we expect it to be well-received, and believe there is sufficient liquidity in the market to take up the offering,” Mr Anderson told Tribune Business.

“I’m hopeful we’ll reach the finish line with it, and start the new [fiscal] year with a new offering.”

Mr Anderson said the upcoming $55 million tranche would be split into the same three pieces, each with the same maturities and interest coupons, as the previous BGS offerings.

The first piece carries a 4 per cent interest rate and three-year principal maturity; the second a 4.25 per cent interest coupon and five-year principal maturity; and the final one is priced at 4.5 per cent interest and a seven-year principal maturity timeframe.

But, with Cable Bahamas having raised almost $75 million earlier this year via its two preference share classes, and Fidelity Bank (Bahamas) taking a further $23.5 million out of the capital markets within the past six weeks, Mr Anderson conceded that it was “difficult to know how deep the market is”.

The two BISX-listed companies have raised a collective $89 million between them, and the RoyalFidelity chief added: “There’s already a lot of money that’s come to the market in that period of time.

“It depends on the appetite of investors and their willingness. There’s always a certain amount of money available. It’ll be interesting to see what’s available at this stage.”

Mr Anderson said the Government’s increasing use of the Bahamian capital markets and their participants as part of its financing operations bodes well for further activity in 2015.

“We’ve not seen things as busy as they are for a long time, if ever,” he told Tribune Business of Bahamian capital markets activity.

The BGS debt is effectively a replacement for the Bahamas Government Registered Stock (BGRS) bonds that were previously issued to investors as part of the Government’s capital raising efforts.

The BGS notes are being placed through Bahamian broker/dealers rather than the Central Bank of the Bahamas. The Bahamas Central Securities Depository (BCSD) has also replaced the Central Bank as the custodian who holds the debt.

The BGS debt is thus effectively “decertified”. They are not BGRS, as investors will no longer need certificates of registration to prove their ownership. This function will now be performed electronically by BISX and the Securities Depository.

And, when it comes to the BGS securities, owners will no longer have to go through the Central Bank, which has to verify certificates of registration, to sell them. This function will be performed by broker/dealers and BISX.

Mr Anderson yesterday said he anticipated that several BGRS issues would mature during the 2015-2016 fiscal year, with the Government requiring BGS issues to refinance them.

And besides that, the Government is seeking to raise a further $250 million in the 2015-2016 fiscal year via the issuance of short-term securities that will be known as Treasury notes.

Mr Anderson explained that these were different from the BGS security, and would likely Treasury Bills as the Government’s preferred short-term financing mechanism moving forward.

Apart from 30-day paper, the $250 million worth of Treasury notes will also include debt with three and six-month maturities.