The Tribune

• Top banker predicts active year despite economic ‘drags’

• Warns govt between fiscal ‘rock and hard place’

• Faces balancing act on raising taxation near election

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Up to $200m could be raised “in one of the bigger years” for the Bahamian capital markets, a leading investment banker has predicted of 2021, despite the protracted recovery from COVID-19.

Michael Anderson, RF Holdings (the former RoyalFidelity) president, told Tribune Business that total capital raising by both private companies and government corporations could reach such sums based on issues that were already in the pipeline or likely to come to market before year-end.

Identifying Nassau Cruise Port, Bahamas Power & Light (BPL) and the government’s Family Island airport financing as just some of the known raises set to approach investors this year, Mr Anderson said such activity will occur despite the backdrop of continued “drags” on the economy’s post-pandemic rebound.

He identified the government’s fiscal woes as one such obstacle, arguing that the Minnis administration is “between a rock and a hard place” on the nature and timing of any new and/or increased taxes to stem the financial bleeding created by this year’s $1.327bn deficit and next year’s projected $900m-plus in further ‘red ink’.

The RF Holdings chief added that the government will find it hard to balance the need for more revenue income with not slowing the economic recovery further via taxation, with the upcoming general election also likely to influence the timing of further levies on Bahamian companies and households. 

“We saw this year as being one of probably the bigger years for a while,” Mr Anderson told this newspaper of equity and debt capital raises. “Somewhere between $100m to $200m will be raised in the local market because of various transactions. I think it’s definitely between the $100m to $200m level, and the funding is definitely around to do it.

“The Family Island airports need $150m-$160m, possibly even $200m, although not all of that will get done this year. You’ve got the BPL transaction [rate reduction bond] with $85m getting raised. You’ve got the Shell transaction and the cruise port transaction, both the equity and the additional debt for the latter. If you add those up there’s a couple hundred million between them.”

Nassau Cruise Port is due to seek additional debt financing to complete Prince George Wharf’s $250m transformation, while also giving Bahamian investors the opportunity to own a collective 49 percent of the project by selling them shares in The Bahamas Investment Fund, the vehicle that will be created to hold that stake.

The Shell transaction, meanwhile, which will involve raising capital to finance the construction of a liquefied natural gas (LNG) terminal and associated infrastructure at Clifton Pier to supply fuel to New Providence’s new power plant, depends on the multinational energy giant finally securing an agreement with BPL. The latter is also supposed to raise $85m from local investors with its own bond.

Mr Anderson, though, said capital market possibilities are not just limited to fund-raising. “The opportunities are not just there,” he added. “We’re speaking to one of the public companies about how they expand because they’re now looking at opportunities to grow their company and how they fund the transaction. 

“Those types of activity are starting up again. A number of entities as the economy starts to recover are looking at how do they grow. There’s a huge requirement that’s going to come out as we start to move forward with people figuring out how to grow.”

The RF Holdings president, who declined to name the BISX-listed company involved, conceded that The Bahamas was likely to endure “a kind of delayed or slower recovery” from COVID-19 due to the protracted wait for hotel and hospitality industry employment levels to recover to pre-pandemic numbers.

“Until the economy gets capital and employment, it will be a slow recovery,” he warned. “The Government is running as deficit, and ultimately is going to start to need to offset that, which will involve some form of taxation. Any time you have some form of taxation, it slows the economy down. 

“While there may be tourism demand, there’s going to be difficulty realising the potential because the country is behind, and people cannot afford to pay for the [fiscal] shortfall but government cannot afford to continue to run such shortfalls.

“There’s going to be some negative drag on economic growth that will come from the Government’s position.” The International Monetary Fund (IMF) is projecting just 2 percent gross domestic product (GDP) growth for The Bahamas in 2021, following what could have been up to a 20 percent contraction in 2020, which Mr Anderson said reaffirmed the likely slow COVID rebound.

As to the timing of any new and/or increased taxes, given that the Government will effectively be squeezing a dry taxpayer carcass, Mr Anderson replied: “It’s difficult to say say because there’s an election issue. How the Government balances the idea of needing more money with needing to get re-elected, it’s a difficult balance.

“I don’t think anybody would like to be in their position making this decision. It’s the proverbial rock and a hard place.”