The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Institutional investors are likely to be left disappointed after the last Bahamas Government Stock (BGS) issue for the 2014-2015 fiscal year was more than 63 per cent oversubscribed.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business via e-mail that last week’s $52 million issue had “raised in excess of $85 million” even with all documents yet to be received.

He added that the Government wanted to keep the total sum raised at $52 million, meaning around $33 million of capital will be returned to investors and have to search for an alternative home.

Mr Anderson said the Government had instructed RoyalFidelity, as placement agent, to ensure retail investors who had subscribed for $10,000 or less received their full allocation.

This means institutions, such as pension funds and insurance companies, which subscribed for multi-million dollar sums will not receive the amounts they sought. Their allocations will be based on “a pro-rated share” of the funds subscribed for.

“We haven’t got everything in as yet, but we raised in excess of $85 million,” Mr Anderson told Tribune Business.

“Based on feedback from the issuer [the Government], they would like to keep the offering at $52 million. They have requested that we ensure that all persons investing $10,000 or less get their full allocation, and the other investors receive a pro-rated share of the funds they subscribed.

“RoyalFidelity will soon be unveiling the proposed schedule for BGS for 2015-2016, and investors receiving part of their investment back will hopefully be able to invest in future offers.”

The 48-hour BGS issue, which closed on Thursday, June 18, was widely anticipated to be fully subscribed or even over-subscribed. The total $85 million raised, though, is likely to have exceeded both the Government and RoyalFidelity’s expectations.

It also means that the Government has achieved its goal of raising a total $200 million in debt financing from its new BGS security during the 2014-2015 fiscal year.

Last week’s $52 million issue was the third and final BGS tranche scheduled for the fiscal year that closes on June 30. It was split into the same three pieces, each with the same maturities and interest coupons, as the previous BGS offerings.

The first piece carried a 4 per cent interest rate and three-year principal maturity; the second a 4.25 per cent interest coupon and five-year principal maturity; and the final one was priced at 4.5 per cent interest and a seven-year principal maturity timeframe.

The BGS debt is effectively a replacement for the Bahamas Government Registered Stock (BGRS) bonds that were previously issued to investors as part of the Government’s capital raising efforts.

The BGS notes are being placed through Bahamian broker/dealers rather than the Central Bank of the Bahamas. The Bahamas Central Securities Depository (BCSD) has also replaced the Central Bank as the custodian who holds the debt.

The BGS debt is thus effectively “decertified”. They are not BGRS, as investors will no longer need certificates of registration to prove their ownership. This function will now be performed electronically by BISX and the Securities Depository.

And, when it comes to the BGS securities, owners will no longer have to go through the Central Bank, which has to verify certificates of registration, to sell them. This function will be performed by broker/dealers and BISX.