The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Nassau airport operator’s advisers last night said they had “high expectations” its refinancing will be fully or oversubscribed after raising 90 percent of their target within the first two days.

Michael Anderson, pictured, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that the Nassau Airport Development Company’s (NAD) refinancing of its second-tier participating debt tranche had already raised $68m of the $75m required for it to be 100 percent taken-up.

“It’s been very well received so far,” Mr Anderson said of the debt securities offering. “I think the total amount we’re trying to raise was about $75m. We already have subscriptions for around about $68m, so it’s only about $7m that we’re still looking for.

“We have a lot of interest from various parties. Hopefully, as more people become aware of it we will get more interest. We continue to call people, and we’ll hopefully get pretty close by next Friday” when the offering closes.

The task facing RoyalFidelity and its fellow placement agent, CIBC, has been made much easier by the National Insurance Board’s (NIB) decision to roll over its investment in the existing participating debt into the new 7.5 percent fixed-rate securities.

NIB holds close to half of the existing $139.1m participating debt securities, and maintaining its holdings at their current level has sharply reduced the new capital that RoyalFidelity and CIBC have to raise.

The refinancing is designed to reduce NAD’s debt servicing costs, and boost its cash flow, by replacing existing debt that carries a two percent fixed rate and 11 percent floating rate - 13 percent in total - with new securities priced at 7.5 percent.

The Lynden Pindling International Airport (LPIA) operator was frequently deferring payment of the “floating” 11 percent and rolling it over, meaning it was accruing as a bill that has to be paid at some point in the future.

Mr Anderson yesterday said NAD’s fundamentals had changed significantly from when it first placed the participating debt to finance LPIA’s redevelopment, with the timing of that fund-raising - at the height of the 2008-2009 financial crisis - adding to the premium it had to pay in terms of higher interest.

“When they funded it at the height of the crisis, the airport was not there, the revenue streams were not there, even though they were expected to happen,” the RoyalFidelity chief told Tribune Business. “They’ve now got sustainable cash flow going in, and it’s an entirely different company compared to when it was initially funded.

“The projections support that they’re highly likely to pay principal and interest [on the new debt]. Where the company is today as the principal port of entry in the country, and they’ve got a high quality financial strength rating, all investors should be confident this is a great investment opportunity and the rate of return is excellent compared to most alternative investments.

“It’s been a great start to the offering, and we have high expectations it will be fully subscribed or oversubscribed within the next week.”

RoyalFidelity, in recommending the NAD offering to investors, wrote: “The company’s cash flow from operations has shown stable growth following the 2007-2008 financial crisis, more than doubling from $28m in 2009 to over $60m for the fiscal year ended June 30, 3018.

“The January 2018 increase in rates will further drive an increase in per unit revenues for the current fiscal year, and so is expected to further improve cash flows. By reducing the carrying cost on the participating debt, this will further enhance the company’s financial position and cash flow savings.

“Planned capital expenditures during the term of the notes include maintenance capital expenditure to resurface the runway and potential growth capital expenditure of a new runway should air traffic continue to improve.”

NAD’s total outstanding debt stood at $522m as at end-June 2018, with the participating debt accounting for $125.3m of that sum then. The most senior debt tranche added a further $396.7m. with the airport operator’s total cash on hand pegged at $57.8m.

“NAD is seeking to refinance the high cost participating debt put in place in 2009 at the height of the financial crisis,” RoyalFidelity added. “Since the placement date, NAD has successfully completed the construction of world class facilities and has established a far stronger financial position, with a recent affirming of the ‘BBB-’ credit rating with an upgrade to stable from Fitch.

“While the new notes are repayable by 2035, NAD intends to reduce the outstanding balance on a quarterly basis as cash flow permits.... In addition to substantially reducing the carrying cost of its debt, the refinancing of the participating debt may result in more of NAD’s debt being denominated in Bahamian dollars, substantially reducing interest costs and fees to convert Bahamian dollars to US dollars for repayment of principal and interest.”

NAD’s financial statements for the year to end-June 2018, released to investors as part of the offering materials, reveal that its net comprehensive loss fell by almost $10m year-over-year - dropping from $14.153m to $4.371m as it slashed losses by some 70m percent.

The improved financial performance was driven by increased passenger traffic stemming from Baha Mar’s full opening, plus fee increases, both of which contributed to significant hikes in passenger processing and facilities fees.

Passenger facility charge revenue grew by 15.5 percent or over $7m, rising from $45.464m to $52.508m, while processing fees were up by 51.4 percent from $7.525m to $11.396m. As a result, total operating revenue jumped from $77.028m to $89.396m, a 16 percent rise that put NAD closer than ever before to covering both operating expenses and $68.473m in financing costs.