The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Arawak Port Development Company’s (APD) $21 million preference share offering was “pretty much” fully subscribed one week before it was due to close, Tribune Business was told last night.

Dion Bethell, APD’s chief financial officer, indicating that the private placement was likely to raise more than its target sum, confined himself to predicting it would be 100 per cent subscribed by this Friday’s close.

“It’s open until Friday, and it’s my understanding we will have it fully subscribed,” he told Tribune Business.

“I haven’t got an update for this week, but I know at the end of last week we were pretty much there. We’re more than satisfied.”

The Nassau Container Port operator’s capital raising has been aided by the low interest rate environment, particularly the minimal investor returns available on bank deposits, and the absence of any alternative or competing fixed income investments.

Although the 5.5 per cent interest coupon attached to the preference shares is lower than the Bahamian capital markets expected, something acknowledged by APD, this appears to have been offset by the ‘security’ offered by the company’s 20-year monopoly on New Providence port operations and minimum 10 per cent Internal Rate of Return (IRR).

The latter guarantees returns for APD’s ordinary shareholders - the Government, shipping industry and the Bahamian public - who are paid out after the preference shareholders.

“All these features would attract investors to the security of the plan, and provide them with comfort in the private placement,” Mr Bethell told Tribune Business.

Capital markets observers yesterday suggested the APD offering could attract more than $30 million - possibly as much as $35 million - in investor subscriptions.

The preference shares, though, will be allocated on a ‘first come, first served’ basis, and APD’s Board of Directors will have to determine what happens to the oversubscription and if the $21 million amount is to be expanded.

As the issue is a private placement, it is not a public offering, so members of the public should not seek to become involved. APD is only targeting it at accredited investors, such as high net worth individuals and institutional investors (insurance companies and pension funds etc).

The $21 million preference share issue is just one element in APD’s $43 million Royal Bank of Canada bridge facility refinancing. The minimum investment is $50,000 at $500 per share.

The balance of the $43 million will largely be covered by a new, $20 million long-term loan from Royal Bank.

And APD is proposing a staggered principal repayment schedule for the preference shares

Between the fifth and 12th anniversaries of the offering’s closing, the BISX-listed company will make $750,000 annually in principal repayments. Between the 13th and 19th anniversaries, the annual principal repayments will increase to $2 million, with the remaining $1 million balance repaid at the 20-year maturity date.

The $21 million issue, when closed, will be listed on the Bahamas International Securities Exchange (BISX), according to the document.