The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Deals worth a collective $200m are likely to “slide back” into 2021 due to the fall-out from the COVID-19 pandemic, a prominent Bahamas-based investment banker conceded yesterday.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that the heavy volume of local capital markets fund-raising he had predicted just three months ago was likely to be delayed or put on hold by the economic lockdown and resulting uncertainty.

Voicing optimism that investor confidence may recover sufficiently for some deals to be funded from the late 2020 third quarter onwards, he added that COVID-19 had likely put paid to forecasts of an active year in the Bahamian capital markets.

However, the RoyalFidelity chief said the pandemic had not deterred all activity as the Bahamian investment bank had still enjoyed “a high level of interest” in its mutual funds during March that was on par with prior years.

He added that this had continued through to the month’s end despite the COVID-19 enforced job losses and business closures, which he interpreted as a sign investors were still seeking higher-yielding returns beyond the Bahamian commercial banking system.

Mr Anderson said there were also few signs of selling pressures among stocks listed on the Bahamas International Securities Exchange (BISX), apart from small, individual retail investors seeking to cash out because of their strained financial situations. Some observers, though, are likely to attribute that to the market’s lack of liquidity and the fact many stocks do not trade on fundamentals.

“I can imagine a lot, if not most of these projects, sliding back until next year,” Mr Anderson told Tribune Business of capital raisings previously-planned for 2020. “It’s possible very little of it gets done this year, but I’m hoping that we get some of it done at the end of the third quarter going into the fourth quarter.

“There’s still the same number of projects sitting out there. There’s still a lot of money sitting and waiting to get moved into investments. Without investments people remain sitting in bank deposits with minimal to low rates for longer. People are looking for investment opportunities to redeploy money, and the real difficulty for investors is what options are available to them.”

Among the deals that had been scheduled to come to market in 2020 were a series of raisings, totalling $100m, to provide a bridging facility for the reconstruction of Nassau’s Cruise Port plus the $140m sought by the Government to finance the upgrade of The Bahamas’ major Family Island airports.

Mr Anderson, though, questioned how the cruise and stopover tourism shutdowns, respectively, will impact these because both rely on that industry for the customer base that will help them repay the debt. Each will charge a passenger user facility fee to repay their lenders, but the uncertainty over when this sector will rebound is likely to act as a drag on both developments.

Another known financing transaction in the pipeline was the $71m local component of the Bahamas Power & Light (BPL) bond refinancing. However, the RoyalFidelity chief added: “If you look at the BPL transaction for example, clearly that’s been put on hold.

“Government had to change some of the legislation around it, but the markets have changed and there’ll have to be some recalibration of that particular security. If that cruise ship facility revolves around tariffs from passengers, how long is it going to be to get full boats to come back here and return to some normalcy again?

“Those airports are all linked into tourism. How long will it be for air travel to get back where it was? You end up having to defer some of these things until you get air traffic back to certain levels. We don’t know what happens this year. I think it’s going to be harder to raise money for the fact the economy has taken some hits.”

Mr Anderson said the economic landscape for all Bahamian businesses, investors, workers and their families now looked radically different to the one that presented itself just six to eight weeks ago.

“If you look back at the beginning of February, clearly we didn’t see this,” Mr Anderson added. “It’s difficult because there is so much uncertainty around timing, and it’s the timing of the US tourists coming back to market.

“We’re going move into the summer season at the end of the COIVID-19 period, and the slower [tourism] season is going to be even slower. I’m not sure what tourists are coming between now and Thanksgiving.”

Despite the huge, and sudden, contraction in the Bahamian economy, Mr Anderson said certain aspects of the capital markets have yet to be impacted. “We still saw a high level of interest in investing in our mutual funds all the way through the end of March,” he disclosed to Tribune Business.

“Particularly fixed income securities, people feel very comfortable. I expect we’ll see similar in April and May as people look for alternative investments. It’s nice to see people still being positive about the markets, and we continue to believe where we are is not bad for years to come. This is a short-term situation, and as the market clears people will come back looking.

“Once we get through this the markets will pick up again, and people will have to look for opportunities again. For us, I’m hoping we can find opportunities for people to invest.”