The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The placement agent for the latest $52 million Bahamas Government Stock (BGS) issue yesterday said it was “comfortable” based on market signals that it will be fully subscribed.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, said the third - and final - BGS issue for the 2014-2015 fiscal year would possibly be oversubscribed, although it was hard to tell by what amount.

The 48-hour BGS issue launches today, and Mr Anderson said: “We went out for broker/dealer indications, and felt comfortable with the indications that we got that it will be fully subscribed.”

He added that some broker/dealers were now suggesting that they, and their clients, might invest sums “way in excess” of their initial projections and feedback.

“We’re starting to see people revise their projections upwards,” Mr Anderson said. “We have a sense it will be fully subscribed, possibly oversubscribed. By how much we don’t know.

“Our sense of the market is that there are a couple of large participants coming into the market with amounts larger than initially anticipated.

“There’s enough liquidity in the system to be fully subscribed. It’s always good to see an amount in excess of what we’re used to.”

Mr Anderson also expressed hope that the $52 million BGS issue would spark greater participation by Bahamian retail investors, as opposed to institutions.

“I’m hoping that come Thursday we will have much broader participation in the market by individuals as opposed to institutions,” he added.

The Government is aiming to rose a total $200 million in debt financing from its new BGS security during the 2014-2015 fiscal year, of which this is the third and final tranche.

Today’s issue will 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.

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.