The Tribune

By NEIL HARTNELL

Business Editor

nhartnell@tribunemedia.net

THE Chamber of Commerce has “some concerns” with the proposed $150 million Hurricane Reconstruction Bond that it is seeking to address with the Government, Tribune Business was told.

Edison Sumner, its chief executive, did not detail the private sector organisation’s concerns to this newspaper, but said the bond could work “if structured correctly”.

“This bond, if established correctly and structured right, could work,” he told Tribune Business. “We have some concerns about it, but are working with the Government to address that.”

This newspaper reported on Friday how banking industry sources felt the interest rate that was being proposed by the Government for the bond was too low, and would prove relatively unattractive to investors.

Tribune Business was told that the initial bond proposal was for a note that would carry a 10-year maturity, and pay investors an interest coupon of between 1.5-3 per cent.

However, the interest returns are far below what is offered on typical Bahamas Government Registered Stock (BGRS) issue. Indeed, a $50 million bond issue, carrying a 5.4 per cent interest coupon and 20-year maturity, was fully placed by the Central Bank on the Government’s behalf just before Matthew’s arrival.

Mr Sumner did not say whether this was among the issues causing the Chamber concern.

He emphasised, though, the Government’s desire to place the bond quickly and raise the necessary financing, given the urgent need for food, water and shelter in the areas devastated by Matthew, plus the amount of repair work required to public infrastructure assets and buildings.

“The Government is doing this so that it can get a short timeline to floating these bonds,” Mr Sumner said. “It has to be a very short term to raising the funds, as businesses and the country need access to those funds immediately.”

He echoed previous calls by Chamber chairman, Gowon Bowe, and others for the Government to start setting aside monies from its annual Budget to act as a multi-million dollar contingency when future hurricanes strike the Bahamas.

In time, this fund could build up sufficiently to become a means of self-insurance, and Mr Sumner said: “If we encounter these kinds of catastrophic events in the future, we can set aside resources over time to mitigate these losses when they occur.”

Commercial banking industry sources told Tribune Business last week that the sector and the Government were exploring the possibility of a syndicated loan, as well as a bond, as options for raising the necessary financing.

The banking industry is talking internally to determine each institution’s appetite, and how much each is prepared to lend the Government, either through a bond or syndicated loan.

The former option would operate in a similar fashion to a Bahamas Government Registered Stock (BGRS) offering, where investors are issued with promissory notes (bonds) promising to pay them interest dividends at set intervals, until they get their money back at the maturity date.

A syndicated loan is one where various commercial banks/lending institutions pitch in to lend part of the total sum sought by the borrower (in this case, the Government), thereby sharing the risk.

However, some lending institutions had already “maxed out” or gone above their exposure limits to the Government, via BGRS issues and loans, which could further complicate efforts to raise hurricane relief financing.

It’s not an easy sell to the banks,” one source added, “as they may not want the exposure. And it’s not the time to ask investors to dig deep for a hurricane reconstruction bond when they may need to help themselves.

“There’s only so much money in this market, and you can’t keep going to a stone and beating blood out of it. To get the commercial banks to participate, they’ve got some headwinds blowing against them in that regard.”

Mr Sumner, meanwhile, distinguished between the work being done by Bahamas Power & Light’s (BPL) line crews and the company itself in the wake of Hurricane Matthew.

He emphasised that criticism of BPL had been “constructive”, given the weaknesses exposed in its disaster management system, and the length of time taken for the utility monopoly to source international support.

“We’ve been very harsh on them and critical,” Mr Sumner said of BPL, “but constructively so, because we found weaknesses in their system of disaster management.

“We’re still critical of the time taken to get it done, and the fact they did not get the international support on the ground in a day or two after the storm; it’s still coming.”

However, Mr Sumner paid tribute to the work being performed by BPL workers, who were “making tremendous sacrifices and not attending to their personal needs” to restore power to New Providence.