The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE $70 million sale of the Government's majority shareholding in Aliv should be completed by end-April 2018, its advisers revealed yesterday.

Gowon Bowe told Tribune Business that the Prime Minister and senior Cabinet members had now "satisfied themselves" that the original plan for disposing of the 51.75 per cent stake should be followed through.

With the Minnis administration had 'agree in principle' to proceed with the strategy left by its predecessor, Mr Bowe said he and other advisers to the Aliv private placement had been updating the offering document with current financial information. He added that the "final" private placement memorandum (PPM) would be reviewed this month by the Boards at Aliv and HoldingCo, the latter being the entity that holds the Government's stake in the new mobile operator, to ensure all details were in order.

Mr Bowe, though, warned that the Aliv placement's timing needed to be carefully co-ordinated with the Government and wider capital markets to avoid competing with other offerings "for the same sources of funds".

"There is an expectation that this first quarter will be used to get everything out of the way," he told Tribune Business of the Aliv sell-off's completion. "Being realistic, and mindful that Easter falls at the end of March, I would project a timetable of the end of April."

The Aliv private placement has been on the 'launch pad' for almost a year, with the May 10 general election's timing - and the new administration's subsequent Board changes at HoldingCo and the mobile operator - blamed for repeated delays.

Mr Bowe previously warned the Government not to stall the Aliv offering for too long, given that targeted institutional investors such as pension funds, mutual funds and credit unions cannot afford to keep multi-million dollar sums waiting for ever on an investment opportunity with an uncertain timeline.

However, aided by the relatively limited supply of alternative investments, Mr Bowe yesterday said most of the targeted investors had reported capital remains available for the Aliv deal.

"The abeyance period was waiting for all the Board appointments to be confirmed, which has taken some time," he said of the delays. "We've started at least reaching out and talking to them [potential investors], and each of them has gone back to their Boards to ensure they're going to proceed on the same basis as before and that the sources of funding were not diverted and are still available.

"They're not going to sit on money, but what's good for us is that there are not many opportunities for them to deploy funds in alternative investments. Most of them have indicated they still have funding available."

Mr Bowe, now Fidelity Bank (Bahamas) chief financial officer, told Tribune Business that the Aliv placement's timing needed to be co-ordinated with both government and private sector capital raisings to avoid competition for scarce capital.

"The only other side is making sure what the Government is going to be doing," he said. "Having done the significant debt raise [$750 million bond] in the international capital markets, hopefully they will not be tapping the same source of funds we have commitments for.

"Given the Government's comments on BTC and other elements, we have to work with them and co-ordinate so we do not inundate the market at one time. There needs to be a very clear strategy with the Government and corporate houses understanding the availability of funds, and making sure we're on the same page with respect to timing."

The Government, in approving Emera's buy-out of all Bahamian shareholders in Grand Bahama Power Company, reaffirmed its goal of creating "a shareholder society" by creating ownership and wealth enhancing opportunities for the public.

It cited the Aliv sell-off, and potential reduction of its equity interest in the Bahamas Telecommunications Company (BTC), as two events that would help it achieve such an objective. This indicates the disposal of its majority stake in the Bahamas' second mobile operator is drawing closer, if only to 'sweeten' its approval of Emera's deal.

Should the $70 million Aliv offering be fully placed, the Government would realise a much-needed one-off revenue windfall to help cover its combined $722 million deficit financing needs for this fiscal year and last.

It thus represents 'low-hanging fruit' for the Minnis administration in terms of securing significant income for the Public Treasury and easing the Government's precarious fiscal position.

Mr Bowe yesterday said the three ministers overseeing the placement - Dr Minnis, KP Turnquest, the Deputy Prime Minister, and Carl Bethel QC, the Attorney General - had all given the go-ahead 'in principle' to proceed with the sell-off.

"We had a meeting with the ministers responsible for it, and they have now satisfied themselves of the plans originally set in place," he told Tribune Business. "They've given us effectively an agreement in principle to proceed on the basis of where we were before."

While the Government now only needed to "dot the 'i's' and cross the 't's' on its end, Mr Bowe said approval for the transaction was also required from the Aliv and HoldingCo Boards.

The private placement's advisers have been working to update the private placement documents from the version circulated eight months ago, with Aliv's first annual financial statements for the year to end-June 2017 now being made available to prospective investors.

Updated financial projections are also being provided to ensure full disclosure, after the latest information was received at end-December 2017. The Aliv and HoldingCo Boards are set to review the revised PPM this month.

"I think we can now see the wheels turning," Mr Bowe told Tribune Business. "It's a bit of a snowball effect; once it starts rolling down the hill, it moves quickly. The framework is in place and it's not a case of overhauling the foundation; it's just updating the work that has been done."

The Government's Aliv sell-off has come under criticism for excluding retail (individual) investors, a strategy that was previously justified on the basis that the mobile operator was a 'start-up' and not suitable for 'less sophisticated' investors.

It was also argued that the institutional investors targeted represented the broadest possible spectrum of Bahamian ownership through their members, thereby enhancing the Government's ownership/wealth creation aims.

However, given that Aliv has been in business for more than a year, and now possesses audited annual financial statements, some observers may argue that the company is beyond the 'start-up' stage.

The Government's HoldingCo investment was effectively a 'bridge financing' arrangement by to ensure that Aliv's network roll-out was not delayed by the wait for private investors to come in.

Its exit was always planned, apart from any minority interest the Government may want to retain as an income asset.

The $70 million potentially generated by the sell-off would also enable the Government to, finally, realise the proceeds from the $62.5 million spectrum license paid by Cable Bahamas, which has Board and management control at Aliv. Those funds were immediately injected back into Aliv as HoldingCo's share of its infrastructure build-out costs.

HoldingCo was initially conceived as a vehicle that would pool Bahamian capital for investment in a variety of infrastructure-based developments throughout the country, with Aliv designed to be just its first holding.