By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Arawak Homes’ chairman has urged ‘risk takers’ to do more if the Bahamas is to shake off its economic malaise, warning that the country “is in a very dangerous spot”.
Sir Franklyn Wilson told Tribune Business that with Moody’s threatening to downgrade the Bahamas’ sovereign creditworthiness, entrepreneurs needed to step forward and prove they truly “believe in the Bahamas”.
Reiterating calls for Bahamian investors to break out of the “risk averse” mindset, he argued that with almost $1.5 billion in excess liquidity in the commercial banking system, access to capital is no problem for those who qualify.
Sir Franklyn added that the need for greater risk taking was “not unrelated” to the threat of a credit rating downgrade, given that Moody’s as well as the Bahamas wanted to see this nation achieve greater economic growth.
He also urged Bahamians to cast aside party political divisions and unite in trying to ward off any downgrade, arguing that Opposition supporters were almost willing it to happen in the belief it would boost their party’s prospects in the upcoming general election.
Sir Franklyn, though, conceded that the same happened prior to the 2012 general election, when some PLP supporters “seemed to be almost pulling for another murder” as a way to enhance their chances.
He added that “bad news for the country” should not be celebrated by any right-thinking Bahamians.
To illustrate his concerns on ‘risk takers’, Sir Franklyn turned to Cable Bahamas’ latest $50 million preference share issue, which launched last week.
Some $30 million of that sum is being sought from targeted Bahamian institutional and high net worth investors, and the Arawak Homes chairman pointed out that Cable Bahamas was coming back to the capital markets for the same sum it had unsuccessfully sought to raise earlier this year.
That was through a rights offering of additional equity to its existing shareholders. Yet Sir Franklyn said Cable Bahamas was now seeking investors in preference shares, a debt instrument that ranks higher than equity in the creditors’ queue upon a company’s insolvency.
“What Cable Bahamas continues to demonstrate is a wonderful glimpse into the mindset of investors in the country,” he told Tribune Business.
“They are just so risk averse, and this is why there is a preference for preference shares over equity. Cable Bahamas had a struggle raising $30 million of equity, and came back two months later for $30 million of preference shares.”
Preference shares carry interest coupons guaranteeing certain returns, whereas with equity - ordinary shares in a company - the upside can be greater, but the yields and risk more volatile.
“We genuinely need a change in investor attitudes towards taking risk, otherwise we’re going to have some serious problems,” Sir Franklyn added.
“You can’t develop a country without risk takers, and they have got to do more than buy preference shares. They’ve got to be prepared to invest, particularly with this mobile licence.
“It seems to me that investors in this country should be looking at equity in Cable Bahamas as a better buy than the preference shares. If they [the company] achieve what they’re going to achieve, the upside there is the equity,” he continued.
“If you don’t believe that, why buy the preference shares? It speaks to the fact we need change in terms of how investors in this transaction deal with risk.”
Sir Franklyn said the Bahamas’ lack of economic growth, Moody’s threat of a credit rating downgrade to potential ‘junk’ status, and investors’ ‘risk averse’ appetites were “not unrelated”.
“Moody’s wants to see growth; everyone wants to see growth,” he explained. “To generate growth, you need risk takers, and the risk takers cannot forever be foreign investors.
“Look at the level of liquidity in the system to fund deals. We just need the risk takers. Moody’s doesn’t need to downgrade the Bahamas now. But all of us in this country need the economic risk takers to do more.
“Believe in the Bahamas. That’s not a political statement in this context. Believe in the Bahamas. Believe in yourself by investing in your country. The capital is here; we’ve got to use it.”
As to the prospects of a potential ‘junk bond’ status, Sir Franklyn told Tribune Business: “If there’s a downgrade and you are not concerned, you cannot possibly love the Bahamas.
“The only other point I make is that we’re in a very dangerous spot. This country is so steeped in politics that about half the people are pulling for a downgrade.
“They talk it up, want to almost see a downgrade. If a downgrade happens, the Government of the day will be blamed, and they believe there will be a better chance for my party to win.”
Conceding that such thought patterns were not new, Sir Franklyn added: “It’s not too dissimilar to before the last election. You had supporters of the PLP almost pulling for another murder.
“It’s crazy, but every time there was another murder, it was more reasonable to believe the then-government could lose.”
Sir Franklyn urged all Bahamians to recall comments by former prime minister Hubert Ingraham when Atlantis’s Phase 2 expansion was going well, but being subjected to “pot shots” from the then-Opposition PLP.
He added that Mr Ingraham had said words to the effect that ‘good news for the country is bad for the PLP, and they have to come to grips with reality’.
Expanding on this theme, Sir Franklyn told Tribune Business: “We cannot flip the table to say bad news for the country is good fort the Opposition. Let’s avoid that mistake.
“Good news for the country is good news for all, and should be celebrated by all, including the Opposition. Bad news for the country is bad news, and should not be celebrated.”
Comments
observer2 7 years, 9 months ago
This is an excellent time to invest hard earned money into the Bahamian economy. With VAT, increased business license fees, increased national insurance rates, BEC distroying all of your equipment, Baha Mar shut down, Moody's threatening to down grad use to junk, opposition fighting amongst themselves like a bunch of children, D average workers, lack of internal controls at Post Office Bank, money missing from Road Traffic, pot hole filled roads, foreigners buying up the family islands, government increased fees on bank transfers, VAT on international services to financial firms, I could go on and on.
Cable Bahamas is over leveraged with hundreds of millions in debt. Facebook the owner of WhatsApp is putting cell phones calls out of business with 100 million new Customers each month covering one sixths of earths populations. Cell phones will be obsolete in 5 years. Smart devices will rule.
So let's follow the recommendations of Sir Frankie and invest in the Bahamas.
asiseeit 7 years, 9 months ago
The main problem is the fact that Bahamians, especially political Bahamians are vindictive and petty. They will give a foreign group far less hassle than a Bahamian group of the opposite political affiliation. Permits appear out of thin air for a foreign project but Bahamians must jump through hoop after hoop. Then add on the general shit business red tape and "lunch" that must be dealt with and is there any wonder Bahamians do not believe in the Bahamas as it is run today. The mismanagement of this country has come to an all time high and new management must be sought!
asiseeit 7 years, 9 months ago
AND JUST SO SIR FRANKLIN KNOWS ANYONE WITH HALF A BRAIN IS SCARED, TERRIFIED, AND WORRIED FOR OUR DEAR BAHAMAS AT THIS TIME!
John 7 years, 9 months ago
What the snake needs to do is advise his government that the days of running a dual economy must end. Forthwith. You have the struggling , law abiding, honest citizen who is burdened and saddled with so much taxes it is impossible to barely stay in business much less make a profit. Then you have the cronies and political lackeys who use every effort to not only evade taxes but to avoid paying all other bills associated with their business. Yet the overburdened tax payer must compete with him. Then you have the foreign investors whom government feels must be rewarded for finding his way to these shores and get even more compensation for opening a business here. So he is exempt from paying most of his taxes and some seldom pay the taxes they are required o? And what do they do with their profits? Export them to their home country. So essentially they milk the cow for free and when the milk dries up they fly away and usually leave heaps and heaps of unpaid bills. That's what needs to be fixed in this country. Too much money is leaving and to much taxes on local businesses
SP 7 years, 9 months ago
... 43 years denying Bahamians opportunities have come 360 to bite PLP and FNM ...
What did they "TINK" would eventually happen by disenfranchising Bahamians? IDIOTAS.
The_Oracle 7 years, 9 months ago
Funny, now that he has great wealth via political cronyism and connection he realizes his great fortune could be liquidated in one fell swoop via devaluation. Ironic.
BahamaPundit 7 years, 9 months ago
We do not wish for a downgrade, but we do wish for the accountability of our government officials, which have used their African race as a shield from acting like law abiding citizens. I am so tired of hearing the Bahamas is a black country, so it's our time to do whatever we please. The Bahamas that you believe in has been desecrated and soiled by your thieving and money laundering. Millions of borrowed funds have been laundered through worthless projects, such as BAMSI, into the pockets of politicians and their cronies. If the downgrade and subsequent IMF taking over the economics of the country will stop the blood letting, patriotic Bahamians support this move. The imposters and traitors that have laid to waste this once great country will finally be shown for what they truly are: worthless crooks.
DEDDIE 7 years, 9 months ago
I prefer local blood suckers than international ones. The IMF has it share of cronies waiting to buy state institutions for auction like prices.
banker 7 years, 9 months ago
Co-sign. Been saying this for years. The PLP exploited Bahamians and robbed them of their patrimony.
BMW 7 years, 9 months ago
Well said bahamapundit. I can sum it up in one word "entitlement" I see this mentality daily.Sure is destroying this country.
themessenger 7 years, 9 months ago
It is all well and good for Sir Snake to advocate for "risk takers" in the local business community to do more to try and revive whats left of our economy. The Bahamas is "in a dangerous place" he states from the security of his millions, government favors and exclusive contracts. Foreign Direct Investment is down by 76% due for the most part to lack of investor confidence in his business associates, aka the government. They added another 125 million to the National debt in the first quarter of this year, yet he has the gall to suggest that Bahamian businesses, many of which can barely make payroll each week thanks to savage taxation, invest more money in this sinking ship? On the contrary Mr. Wilson, we are afraid but we are not all pulling for a downgrade, we are pulling for the biggest impediment to economic recovery in this country, the government, to go away!
Honestman 7 years, 9 months ago
Sir Snake has a nerve, eh?
Alex_Charles 7 years, 9 months ago
Of course Snakey Wilson can say that. Didn't arawak homes just score a massive contract this year in what the PM calls a stimulus to the contraction industry, because Snakey can fit more homes on the properties? I have no respect for the gangster operation. A dollar for Arawak homes is a dollar for ALL the current and former ministers that have invest in that gangster operation.
banker 7 years, 9 months ago
I hope that the mills of God grinds them to dust... just like Myles Monroe received his heavenly reward ... smashed to smithereens in a private jet to boot ... God has a sense of humour.
proudloudandfnm 7 years, 9 months ago
How much has Frankie made off of us this term? How many committees has he sat on? How many special tasks has he been "given"?
And all for nothing. How much did we pay him to get the ever elusive 2% shares back?
By the way Sir Frankie. Where the hell are those shares???
PLP hypocrisy is astounding...
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