The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau Cruise Port will move to refinance its recent $150m bond issue at the earliest possible opportunity, it was revealed yesterday, having elected to keep the offering’s $20m over-subscription.

Michael Maura, the cruise terminal operator’s chief executive, told Tribune Business it will “definitely” seek to refinance at lower interest rates once the global capital markets stabilise post-COVID-19 in a bid to reduce debt servicing costs.

The eight percent interest coupon investors will receive is more expensive than Nassau Cruise Port had initially hoped to pay, and Mr Maura confirmed that the bond’s terms enable the company to refinance the debt issue any time from May 2022 onwards - some two years after it has been placed.

He also disclosed that Nassau Cruise Port had decided to retain the $20m raised over and above the bond’s initial $130m target, the issue having been oversubscribed by 15.4 percent at its closing.

“Obviously this COVID crisis drove the cost of money up,” Mr Maura told this newspaper. “The eight percent yield was obviously very attractive to investors, but it is relatively speaking expensive money when you consider the cost of money six months ago.

“So as confidence returns to the market and interest rates settle a bit, at that point we’ll be looking at that and will make the necessary decisions.” He also affirmed that Nassau Cruise Port’s future capital raising needs, which it plans to source in 2021, will be reduced by the $20m oversubscription to the recent bond offering.

“The board met and it was agreed that we would keep it,” Mr Maura said of the extra funding. “We were grateful for the enthusiastic response to the offering, and the board made the decision to keep the $20m oversubscription.”

Nassau Cruise Port’s total $284.3m financing needs, of which $204m is earmarked for Prince George Wharf’s reconstruction, originally called for a further $80m of debt funding to be secured in the 2021 first half. The remaining $74.3m is due to come from equity investments by its controlling shareholder, Global Ports Holding, and Bahamian investors who will buy into The Bahamas Investment Fund. Each is to have a 49 percent stake.

Mr Maura yesterday said the equity raise, which aims to give around 20,000 small Bahamian retail investors an opportunity to own shares in the cruise port through the fund, was still on schedule to take place in the 2021 first half. The remaining 2 percent will be held by the non-profit Yes Foundation, which will invest in charitable causes in The Bahamas.

Mr Maura spoke after Global Ports Holding confirmed both the $150m total amount raised by the bond and the refinancing plans in a conference call with investors to discuss its 2020 first quarter results. The figures unveiled show just how vital Nassau Cruise Port is to the company, as the destination accounted for 66 percent or two-thirds of the 1.253m total passengers that went through its 17 cruise ports in the three months to end-March 2020.

Mehmet Kutman, Global Ports Holding’s chairman, told analysts that Nassau Cruise Port had achieved this effect despite the 834,000 passengers it processed being “lower than expectations” as the final two weeks of March were lost to the COVID-19 shutdown.

Nassau, which was not included in Global Ports’ 2019 results as the company did not sign the 25-year operator agreement with the Government until August, was chiefly responsible for producing record first quarter results.

Total cruise passenger volumes were up 146 percent compared to just 0.5m received by its ports in the 2019 first quarter, while cruise revenues jumped by 102 percent year-over-year to $11m compared to $5.4m in the prior year. Global Ports’ earnings before interest, taxation, depreciation and amortisation (EBITDA) were up 61 percent at a record $5.7m compared to the previous year’s $3.5m.

The figures were released amid continuing uncertainty and fears as to when the cruise industry will resume sailing after it last week pushed back the resumption of voyages from US ports until September 15. Many observers believe this could be delayed further still as the sector grapples with adjusting its business model to compensate for the stringent COVID-19 health protocols it must introduce.

Emre Sayin, Global Ports’ chief executive, said securing the deal to manage and transform Nassau Cruise Port had “caused a step change” in the company’s prospects despite the fall-out from the COVID-19 pandemic derailing its near-term impact.

“I want to talk about Nassau,” he told analysts. “In this time we tried to cut costs down to a minimum, we tried to reduce our cash outlays, but at the same time we kept investing in critical projects. Nassau is definitely one of them.

“Very recently we had raised, issued, a $150m bond, 2040 bond, at 8 percent under very good terms, I believe, given the conditions at the time.” Global Ports’ investor presentation hailed the bond for being placed on “significantly better terms than other recent cruise sector bonds”, likely referring to the recent billion dollar capital raises by the likes of Carnival and Royal Caribbean to keep them afloat during COVID-19.

A Global Ports corporate finance spokesman, echoing Mr Maura, strongly hinted to analysts that Nassau Cruise Port will seek to refinance its $150m bond at lower interest rates once the two-year lock in expires. This, he added, would likely coincide with when Prince George Wharf’s transformation will be completed in April 2022.

Suggesting that the bond issue’s success had implications that extend beyond Nassau, the spokesman said: “We have successfully completed not just the target volume of financing in Nassau but we have exceeded our target. It’s not just financially an important step, but it’s a big sign and big signal to the industry as a whole, and the Caribbean specifically, that this project continues..... and will be completed as scheduled.

“I think it extends beyond having successfully completing this financing, and continuing with the capital expenditure programme as well. I think within this time it is a tremendous success having raised this funding and achieving this oversubscription.

“Over 200 investors have trusted us to finance most of the bulk of the capital expenditure that now needs to be spent. Only small amounts of financing will need to be raised towards the second half of 2021 to complete the project. It [the $150m bond] is long-term capital with a final maturity of 2040, with no principal repayments for the first 10 years. Repayments will start in 2031.”

The Global Ports executive added that the bond was secured on the assets and cash flow of Nassau Cruise Port, not its 49 percent controlling shareholder. “We had more aggressive yield targets when we started the process, but 8 percent is a good achievement compared to other cruise financings raised recently,” he said. “Eight percent is very good in the current environment, but not where we targeted.”

They added that the $150m bond issue’s pricing also reflected The Bahamas’ “country risk”, which had significantly increased just before placement due to the latest “junk” downgrade by Standard & Poor’s. Noting that government debt had previously been priced in the 7 percent range, the spokesman said the “Nassau Cruise Port should price tighter than The Bahamas’ bonds” once the industry and passenger volumes rebound from COVID-19.

“We have the option to refinance that bond with no prepayment penalties after two years, basically in line with the end of the construction,” the spokesman added.

Mr Kutman, meanwhile, said investors who buy into The Bahamas Investment Fund can expect to receive dividends on their outlay almost immediately. Confirming that shares in the fund will be placed by the 2021 second/third quarter, he added: “For sure, assuming the bond interest debt service cover level is maintained at 1.3, there will be dividends distributed immediately from Nassau because of the 49 percent public shareholding.

“That’s the expectation of the people according to our partners.” The 1.3 figure is the debt service ratio that must be maintained as part of Nassau Cruise Port’s agreement with the bondholders before dividends can be paid to its shareholders.

Describing Nassau as “a must call destination”, with “more than a cruise ship a day” arriving at Prince George Wharf, Mr Kutman said recent statements by Dionisio D’Aguilar, minister of tourism and aviation, gave him total confidence that the cruise lines will be unable to bypass its showpiece Caribbean destination in favour of calling exclusively at their private islands.

“The minister of tourism, a week or two ago, publicly announced there’s no way in the world he’d accept something from the cruise lines to go only to their private islands,” the Global Ports chief added. “It doesn’t make sense to start with, even on the three-day cruises and one destination.

“That will certainly be stopped by the Government so we are very comfortable that if they do three or four day cruises, which will be the start rather than the seven-day cruises, Nassau will be one of the stops.”