The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government is targeting the 2022-2023 fiscal year to exit its 51.75 percent majority ownership in Aliv and raise "at least" $73m, it was revealed yesterday.

The 2019 Fiscal Strategy Report, released yesterday, disclosed that the government's disposal of its equity stake in the mobile operator will help "reduce financing requirements" for itself as it grapples with a projected $238.6m fiscal deficit that year.

Referring to its hugely-expanded borrowing requirements to cover Hurricane Dorian restoration costs, the report said: "To cover the balance of financing requirements [in 2019-2020], the government is presently exploring funding opportunities from other multilateral institutions and banks - both international and domestic - and the possibility of a bond offering.

"In fiscal year 2022-2023, the government's prospective sale of its shares in Aliv is expected to reduce financing requirements by at least $73m --the initial purchase cost of these assets, and in fiscal year 2023-2024, sale proceeds from the proposed solarisation SVP (special purpose vehicle) are expected to lessen borrowing requirements."

Aliv has long represented one of the most obvious opportunities for the Government to realise a one-off injection of significant capital to narrow its annual fiscal deficit, as occurred in 2011 with the BTC privatisation.

The former Christie administration had sought to exit the Government's majority stake in HoldingCo, Aliv's parent, via a private placement to Bahamian institutional investors such as pension funds, credit unions and mutual funds.

This was intended to ensure the greatest possible number of Bahamians participated, and benefited from Aliv's future earnings, via their membership and financial involvement with such institutions. However, the Minnis administration scrapped this model in favour of an initial public offering (IPO) that would give Bahamian retail and institutional investors the chance to hold HoldingCo shares directly, rather than through another entity.

For an IPO to take place, Aliv has to establish a performance track record via audited financial statements. Carl Bethel QC, the attorney general, previously indicated that an IPO will not take place until the mobile operator achieves profitability and, while it has emerged from its growth phase and is making progress towards this milestone, it has yet to hit this target.

The Fiscal Strategy Report, meanwhile, revealed that the Government made a $10.75m shareholder loan to Aliv's parent company in May 2019 to help "bridge emerging cash flow" needs. It indicated that a similar financial injection was made by Aliv's other shareholder, BISX-listed Cable Bahamas, although the amount it contributed was not detailed.

"In May, the Government granted HoldingCo 2015 (HoldingCo), the vehicle created to hold the Government's 51.75 percent equity in Be Aliv, a loan of $10.75m to enable it to comply with Aliv's request for loan funding from its strategic partners to bridge emerging cash flow requirements," the report said.

"HoldingCo and the Government executed a promissory note, which provides for scheduled payments of principal and interest that mirror those to be received by HoldingCo from Aliv over the four-year loan period."

Damian Blackburn, Aliv's top executive, yesterday confirmed the financing transaction to Tribune Business and said it was part of "the normal funding balance that goes on between shareholders".

"It's part of the round of funding we had for the last financial year," he explained, referring to the preference share capital that Aliv raised at the same time. "I would stress that the company has got to the stage where it is EBITDA (earnings before taxation, depreciation and amortisation) positive.

That milestone's been hit, which means the operating cash flows of the company are being covered. We're operating cash flow positive"

Meanwhile, the Fiscal Strategy Report's mention of a "solar SPV" likely refers to the Government's previous Budget announcement that it aims to provide $170m over the next eight to 10 years to finance commercial-scale solar energy opportunities on the Family Islands in partnership with the multilateral lending agencies.

Providing further details, the Fiscal Strategy report said: "The Government proposes to seek some $100m in multilateral creditor funding, to be drawn over the course of three years beginning in fiscal year 2020-2021, as a direct investment into solar energy plans within selected Family Islands.

"This investment is to be made within the context of a special purpose vehicle (SPV) to facilitate a planned privatisation to Bahamians upon completion of the project."

Elsewhere, the report revealed that some $43m was invested by the Government during the 2018-2019 in Lucayan Renewal Holdings, the special purpose vehicle formed to hold Freeport's Grand Lucayan resort.

Moving forward, it added: "In keeping with good governance, the Government is regularising several supplementary outlays made relative to Lucayan Renewal Holdings ($16.1m), part of which will be recouped from the pending sale of the properties, for the upkeep of parks and beaches, and towards the operating cost of the Public Hospital Authority (PHA)."