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Bisx Developing New Gov't Debt Security

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange (BISX) yesterday revealed that it is developing a new debt security for the Government, which will “fill the gap” by offering investors medium-term maturities.

Keith Davies, BISX’s chief executive, told Tribune Business that the proposed paper security would have a maturity of between one-two years and five years, sitting between Treasury Bills and Bahamas Government Registered Stock (BGRS).

The former is used to meet the Government’s short-term financing needs, and is repaid relatively quickly, while BGRS issues are long-term debt that carry maturities extending out for up to 20 years.

However, Mr Davies said the product BISX was working on - which could end up being listed and traded on the exchange - was a medium-term security that would “fill the gap” between the Government’s two existing paper products.

“It would benefit the Government in a number of different ways, filling the gap in an area that is not served,” Mr Davies told Tribune Business.

“It must be done in a very sensible way that benefits the Government. You don’t do things because they’re a good idea; you do things because it benefits them, saves money and will be easily accessible.

“We’re going to present the idea, the opportunity and the mechanism, and it will be up to us, working with the Government’s agent, the Central Bank, and the Ministry of Finance, to make sure this is a viable option for the Government.

“There’s a lot to do in our market. The market is growing up, and rather than experience growing pains, it’s experiencing growth spurts. That’s a positive for us, and we’re trying to keep pace and develop the market as best we can.”

Mr Davies said there had already been communications and correspondence between BISX and the Government parties on the creation of a medium-term debt security, which the exchange was now looking to create.

Its development would tie into the Government’s desperation to reduce its debt financing costs, given the $400 million-plus fiscal deficit projected for the 2013-2014 Budget year, and a National Debt already above $5 billion.

As at end-June 2013, according to Central Bank data, the Government owed $588,582 in outstanding Treasury Bills and had issued $3.647 billion in long-term debt securities.

BISX’s ultimate goal still remains the listing and trading of the latter, which are primarily BGRS issues, on the exchange.

Meanwhile, Mr Davies said the exchange had not abandoned its plans to develop a micro listing facility/tier for companies seeking to raise $1 million or less in capital. A “market structure”, he added, had already been developed.

Acknowledging that he had “promised to deliver that a couple of months ago”, the BISX chief executive said much of his time had been consumed by work on developing a ‘commercial paper’ market (see other story on Page 1B).

“That has been stalled a little bit, but we have done a great deal of work on that already,” Mr Davies said of BISX’s proposed listing facility for small and medium-sized businesses.

“That’s a much larger project than commercial paper. It’s much wider, and touches a much broader part of the community, a wider spread of businesses, and involves a greater number of players to make it work. That requires more time and effort than the other projects, but is no less important.

“It’s something I’m very passionate about,” he added. “That is a long-term solution to some of the issues facing the country, and something I definitely want to happen.

“We have a market structure. The biggest issue for me has always been the market participants, and how we integrate them into the market structure.”

Mr Davies indicated this meant ensuring there were controls on what companies, who raised money via BISX’s micro listing facility, did with the funds they raised from investors through equity or debt issues.

“The support structure is where I’m having difficulty right now,” Mr Davies added. “Realistically, in the market today, that type of support is very expensive and not easily acquired and given.

“I’m trying to pare that down and make it sensible and viable. Given those realities, I have to focus more on commercial paper.”

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