The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Arawak Port Development Company (APD) believes its upcoming $43 million private placement will be 100 per cent “gobbled up” by investors, telling Tribune Business yesterday it was seeking the “optimal” low cost solution.

Dion Bethell, chief financial officer for the Nassau Container Port (NCP) owner, told Tribune Business that the BISX-listed company was trying to come up with an offering combination that would minimise its “interest rate risk”.

While APD had initially looked at bonds and preference shares as the ideal instruments to replace its existing Royal Bank of Canada (RBC) bridge facility with long-term financing, Mr Bethell said bank debt/financing had also entered the equation.

Pointing to the high liquidity/low interest rate environment that existed in the Bahamian commercial banking system, Mr Bethell indicated long-term bank financing rates had come down enough to merit consideration by APD.

He added that the port operator would determine its private placement combination within the next two-three weeks, with the offering launched to targeted investors only in early-mid July.

The short-term RBC bridge facility, taken out to finance the Nassau Container Port’s construction, will expire at end-July, and Mr Bethell said APD planned to have the replacement financing in place by then.

A private placement is open to accredited institutional and high net worth investors only, and is not a public offering, so the Bahamian public should not seek to get involved.

Still, confirming APD’s plans, Mr Bethell said: “We intend to have that funding in place by the end of July, which is when the bridge facility with RBC comes up for expiry.

“We’re trying to finalise the details currently. Our view, and the Board’s view, is to certainly have that settled by the end of July.”

Disclosing that the RBC bridge loan facility was worth $43 million, Mr Bethell said APD’s goal was to replace this short-term financing with cheaper, longer-term debt capital.

Doing this will reduce the company’s debt servicing costs and boost cash flow, thus benefiting its bottom line and shareholders.

Indicating that APD’s initial plans may be subject to adjustment, Mr Bethell told Tribune Business: “The initial plan spoke to a combination of preference shares and bonds, but truly we are looking at all our options, as the banks may be ready to take some portion of the total debt at attractive interest rates.

“Ideally, we’re trying to find the optimal solution for APD and the shareholders, getting a lower interest rate and securing lower financing costs.

“We’re now going through the process of finding out what will be the optimal solution for APD.”

Noting that the private placement would be out in the market for a much shorter duration than the company’s initial public offering (IPO), Mr Bethell said that based on its oversubscription and “the feelers” APD had put out to institutional investors, the company expected the upcoming private placement to be “gobbled up”.

“We feel it will be fully subscribed,” Mr Bethell told Tribune Business. “Back when we took the bridge facility out, there was a tremendous amount of construction risk that we had to manage.

“Now, a lot of the construction risk has been removed, and that makes it attractive to financial institutions. It’s really managing the interest rate risk, and given the amount of liquidity out there, we feel we will be able to get some very attractive rates.”

Describing the construction work at Arawak Cay as “substantially complete”, Mr Bethell said the only remaining project was completion of APD’s administration building, which is scheduled to finish by December 2013 or January next year.