The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A top investment banker is predicting the Bahamian capital markets will have one of “the busiest years” ever in 2020 with around $200m worth of deals needing funding.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business “the trick” will be to ensure there is sufficient capital available at exactly the time different companies and groups are seeking financing.

He argued that it will be “a year of change” for both those issuing securities and investors buying into them, with each forced to move beyond the commercial banking system as a source of financing and savings returns, respectively.

The RoyalFidelity chief suggested there was sufficient demand to “double” the typical number of annual capital market transactions, while the size of fund-raisings is also set to increase from $10m-$15m to $30m and $100m deals.

“It looks like it could be the busiest year in a long time,” Mr Anderson revealed. “For so many years we’ve had three to four transactions per year. This next year we’re probably going to end up with double that, and larger transactions.

“Instead of $10m-$15m transactions you’re going to get $30m transactions and $100m transactions. Somewhere in the region of a couple hundred million dollars will come to market. Bigger transactions and more of them, so it’s going to put a strain on the availability capital when it’s needed.

“It’s going to be very busy in terms of people looking for capital, and will create an opportunity for investors to put their money to work and enjoy better returns. If it works properly, we will have people move out of the banks and put their funds to work by making more money available for people as they require it.”

Among the known financing transactions in the pipeline is the $71m local component of the Bahamas Power & Light (BPL) bond issue, which the state-owned utility and the Government are hoping to place early in the New Year.

Mr Anderson, though, suggested this deadline may be tough to meet given the need for the full $650m capital raise to obtain a rating from the credit rating agencies before it can be priced. He said the industry standard was that it typically takes six to nine months to obtain such a rating.

Still, the RoyalFidelity chief pointed to the estimated $140m that the Government is seeking to raise for the upgrading of 28 Family Island airports as another deal that will likely come to market in 2020, although it will likely be split into smaller tranches and spread over a two to three-year period.

Tribune Business previously reported that a similar structure is being employed with the $100m bridge financing facility for Nassau Cruise Port’s redevelopment, a financing also referred to by Mr Anderson, with that some also broken down into smaller parcels - some of which will be placed in 2020.

He added that several construction projects will also be spurred “on the back of” the Prince George Wharf redevelopment by Global Ports Holding, while other capital raises - including so-called “green bonds” and those for power plant opportunities in the Family Islands - will also likely come to market.

“I think they’ll be looking at issuing green bonds for those renewable energy opportunities out there,” Mr Anderson said.”I think there will be a variety of investment opportunities out there. These are reasonable size deal. These are not small companies, so it’s a good opportunity to get money working.

“In terms of the number of transactions and the size, the amount of money sought will be much larger than is normally the case. To fund them we will have to get people mobilised to move money out of the banks, so I hope we can get that recipe right. That’s where the trick is; to make the capital available at the the right time.”

He added that the markets will “get a better sense of the timing” of upcoming capital raisings early in the New Year, which will be key in laying out a road map for when institutional investors and high net worth individuals need to convert certificates of deposit (CDs) in the bank into liquid, investment-ready cash.

“I think there’s a huge gap been created in the market by the hurricane as a lot of money is needed for repairs,” Mr Anderson said. “The Government is looking to raise capital for private-public partnership (PPP) transactions.

“It will be a year of change, forced change, for both issuers and investors. People have to come and raise money this way. They will be forced into situations they may not have considered worthwhile or necessary, but if they can’t access capital traditionally they will have to look at alternative mechanisms.

“And if investors can’t find decent returns in the bank they will have to look elsewhere. People have been rolling over CDs for two to three years, and have been told they’re getting half the interest rate they received previously. That forces the money to go elsewhere, and hopefully it will go to people looking for it.”

Mr Anderson added, though, said Bahamian capital market raises typically “have a habit of sliding, so it’s hard to organise them”. He urged potential securities issuers to ensure their paperwork and other essentials are “ready ahead of time”, and said: “It’s more a six-month process.

“It could be longer depending on what people are trying to do. People looking for cash need to get themselves organised earlier than they think.”

The latest Central Bank data shows there are some $1.817bn in surplus liquid assets in the Bahamian commercial banking system, a figure that grew by over $285m for the 11 months to end-November 2019.

The traditional year-end draw down is likely to have been offset by reinsurance inflows and government foreign currency borrowings associated with Hurricane Dorian, which means there should be plenty of capital and investors available and seeking higher returns beyond what is available in the banks.