The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to move swiftly on the Prime Minister’s pledge to sell-off the Government’s interests in the Bahamas’ two mobile operators, a financial analyst warning: “Execution is key.”

Kenwood Kerr, Providence Advisors’ chief executive, told Tribune Business that the Minnis administration had to translate “language” into action to ensure it gave the credit rating agencies confidence the Bahamas’ can reverse its fiscal decline.

He was speaking after Dr Hubert Minnis confirmed to the House of Assembly that the Government will sell its 100 per cent interest in HoldingCo, the vehicle that owns the majority 51.75 per cent equity stake in Aliv, the new mobile operator.

The Prime Minister added that his administration also intended to proceed with plans, left by the last Ingraham administration, to sell a 9 per cent stake in the Bahamas Telecommunications Company (BTC) to institutional and retail investors.

The Aliv stake is valued at around $70 million, while the 9 per cent interest in BTC was valued at around $37 million based on the price Cable & Wireless Communications (CWC) paid for its controlling position during the 2011 privatisation.

Together, this could potentially raise more than $100 million in much-needed revenue for the cash-strapped Public Treasury, with Dr Minnis suggesting the proceeds would be used to pay down the $7 billion-plus national debt.

In reality, the monies will be used to narrow the deficit, projected to be $323 million for 2017-2018. Dr Minnis, meanwhile, blasted the former Christie administration for failing to follow through on its predecessor’s plans, and instead focusing on regaining a majority interest in BTC.

He argued that the previous government had failed to ‘spread the wealth’ to Bahamians by reducing the Government’s equity stake for, had it done so, it would have enabled them to enjoy collective multi-million dollar dividend payments over the past six years.

Mr Kerr, though, said it was vital that the Government backed up the Prime Minister’s talk with swift action, and follow through with the planned communications privatisations.

“They need to in fact, not in language, pay down the debt to send the right signal to the rating agencies that this is what we are committed to do,” he told Tribune Business.

“We have to send the right signal, and give them confidence we’re serious about righting the ship. If nothing happens in six months, 12 months or two years, they’re going to downgrade us.

“The execution of these things is important. They can’t all be done at once, but we have to be swift.”

The privatisation of state-owned assets is an obvious option for the Government, as it seeks an escape route from the Bahamas’ fiscal dilemma. Dionisio D’Aguilar, minister of tourism, recently identified Nassau Flight Services as a privatisation candidate, while K P Turnquest, minister of finance, also described this as an option to reduce the $429 million collective subsidy now being paid to government entities.

Mr Kerr recently urged the Minnis administration to focus on privatisation opportunities, including going back to the former Ingraham government’s plan of selling off the 49 per cent equity stake in small tranches that the Bahamian capital markets can bear.

Had the 9 per cent stake’s sale proceeded, it would have been valued at around $36-$37 million based on the price paid by CWC. However, BTC’s value is likely to have been eroded by the end of its lucrative mobile monopoly, which generates close to 75 per cent of its revenue, and entrance of competition via Aliv. As a result, its worth will be a lot less in any privatisation exercise.

Mr Kerr said that apart from BTC, the Government’s equity stakes in Aliv and Arawak Port Development Company (APD) could also be sold “to raise cash and reduce government’s footprint, expand the capital markets and significantly boost/expand Bahamian ownership of national assets”.

And Gowon Bowe, one of the Government’s advisers, recently said the $70 million Aliv placement was “trigger-ready” and only needed the Government to give the go-ahead.

Should the full HoldingCo private placement be taken up, the $70 million raised would, for instance, match the $70 million demand by the Government’s lenders for extra loan security by the first week of July after the ‘junk’ downgrade by Standard & Poor’s (S&P) placed it on the wrong side of a derivative transaction.

The $70 million generated by selling-off HoldingCo would also enable the Government to, finally, realise the proceeds from the $62.5 million spectrum license paid by Cable Bahamas. Those funds were immediately injected back into Aliv as HoldingCo’s share of its infrastructure build-out costs.

HoldingCo was initially conceived as a vehicle that would pool Bahamian capital for investment in a variety of infrastructure-based developments throughout the country, with Aliv designed to be just its first holding.

The institutions eyed as its first investors - pension funds, credit unions and mutual funds - have been targeted because they represent the broadest possible spectrum of Bahamian ownership through their members.