Between 40,000-50,000 Bahamians could own a stake in the second mobile operator’s majority shareholder, with efforts to buy out the Government now glimpsing “light at the end of the tunnel”.
Gowon Bowe, adviser to the Christie administration and its Cellular Liberalisation Task Force, yesterday said they were now “formalising” the private placement of shares in HoldingCo with targeted institutional investors.
He explained that the Task Force and its advisers were providing potential investors with the necessary information to enable them to make an informed investment decision on HoldingCo, which will own a 51.75 per cent majority interest in NewCo 2015 and its ‘Aliv’ mobile business.
In return, Mr Bowe said they were seeking formal commitments on the sums each investor planned to invest in HoldingCo, in a bid to finalise the private placement offering document (PPM).
Mr Bowe, who is now Fidelity Bank (Bahamas) chief financial officer, gave no timeline for when the HoldingCo placement, which is understood to be seeking a sum between $62.5 million to $67.275 million, will be completed.
Revealing that Hurricane Matthew had “thrown a bit of a monkey wrench” into the HoldingCo plans, Mr Bowe said the resulting delay may have aided the placement efforts.
With Aliv’s formal product/service launch now less than a week away, he suggested that potential HoldingCo investors would gain greater confidence from seeing the new mobile provider becoming an operational reality.
“It’s now at the formalisation stage with all of the investor groups we have spoken to; the same institutional investors,” Mr Bowe told Tribune Business of the HoldingCo placement.
“What is happening now is that we’ve been going back to them in the last few weeks to get the amount of their [investment] commitment, and providing the formal documentation and necessary information each of their Boards requires to give approval.”
To gain the “hard commitments and formal approvals”, the Task Force and its advisers are providing investors with ‘term sheets’ showing the main financial details of the proposed offering.
“They can then say ‘we can live with this’, or ‘this needs to be tweaked to accommodate us’,” Mr Bowe explained. “It’s taking in a core document, and matching the auxiliary pieces to all the investor needs.”
He added that this would result in the PPM document becoming “a consensus driven mechanism”, where all investors had agreed to its terms - and the size of their investment - prior to its launch.
The offering itself will then become an “administrative” exercise that closes the buyout of the Government by private investors, who simply have to “write the cheques” to purchase their shares.
“We can see the light at the end of the tunnel,” Mr Bowe told Tribune Business of the HoldingCo process. “We know we’re on the right track. We can see that light in the distance, as we know we’re getting closer.
“We could have upwards of 40,00-50,000 Bahamians having a stake in HoldingCo through these pension plans and credit unions.”
HoldingCo is effectively the joint venture partner of BISX-listed Cable Bahamas in the NewCo/Aliv business, the latter enjoying Board and management control despite owning a minority 48.25 per cent equity stake.
Mr Bowe said the HoldingCo divestment was “one the Government stays excited about” and is committed to, adding that the upcoming general election would not derail the process.
However, he acknowledged that one factor delaying the private placement was Hurricane Matthew’s arrival in the Bahamas in early October. Besides taking over the Government’s priorities, the Category Four storm also distracted the Task Force’s target investors, who were busy providing relief to distressed members and plan participants.
“We were thrown a bit of a monkey wrench by the timing of Hurricane Matthew. Some of the storm’s effects shuffled things around a little bit,” Mr Bowe told Tribune Business.
“What we’re also trying to do is avoid competing with other capital fund raisings that were previously behind us on the schedule, but are now flooding into the marketplace.”
Mr Bowe said the Government’s plans to raise $150 million to finance Hurricane Matthew restoration had also temporarily “spooked” investors, due to initial uncertainty over whether the funds were coming from.
He added that the Task Force was “fortunate” that $120 million was taken by Bahamian commercial banks via a syndicated loan, and not the investors it was targeting for HoldingCo, as this would have reduced the available investment funding pool.
Pension funds, credit unions, cooperatives and mutual funds were targeted as HoldingCo’s first private shareholders because they were viewed as providing the broadest possible Bahamian ownership.
Mr Bowe said HoldingCo had “unique potential”, suggesting that individual Bahamians would eventually have the opportunity to become shareholders via an initial public offering (IPO) in future years.
He reiterated that HoldingCo’s ultimate objective lay beyond mobile communications, given the vision for it to act as a vehicle that will pool Bahamian capital, and ensure local ownership and investment in the nation’s key infrastructure assets.
Mr Bowe said the Government had used Cable Bahamas’ $62.5 million spectrum license fee to fund its, and HoldingCo’s, share of the initial capital contribution to NewCo and its infrastructure build-out.
“It worked well for the Government’s coffers,” he explained. “It was able to make its cash contribution without drawing on the public purse. When the HoldingCo shares are sold in the market, the Government will realise its spectrum fees.”
With NewCo/Aliv’s ‘soft launch’ now completed, Mr Bowe said its Board and management could now start to focus on assisting HoldingCo with the private placement.
He added that Aliv’s product/services launch on November 23 would further bolster investor confidence that the second mobile operator, and first competitor to the Bahamas Telecommunications Company (BTC), is for real.
“The fact we now have an operator, with the testing of phones and a soft launch taking place in the last few weeks, shows that NewCo is coming alive,” Mr Bowe told Tribune Business.
“You have the start of operations, and although you will see a period of expenses exceeding revenues as the business ramps up, investors know there are assets in the ground and a functional mobile network that operates.
“They will have greater security that this is a mobile venture that’s a go.”