The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The University of the Bahamas’ (UOB) advisers yesterday predicted its $18.3 million bond issue will be fully subscribed on the first day, with Monday’s launch only awaiting the Minister of Finance’s sign-off.

Michael Anderson, RoyalFidelity Merchant Bank & Trust’s president, told Tribune Business that capital markets feedback suggested there was already sufficient investor support to finance the entire $18.3 million.

“Based on our initial feedback, we’ve already got sufficient support to close the transaction,” he said. “We don’t anticipate any problems closing it and getting the full amount.”

Mr Anderson said the full offering memorandum for the $18.3 million bond is due to be sent out to targeted institutional investors and investment houses on Friday afternoon/evening, with the taking of subscriptions set to start on Monday.

However, the RoyalFidelity chief said the Monday launch was subject to final approval from K P Turnquest, Deputy Prime Minister and minister of finance, who was yesterday said to have requested details on the $18.3 million offering for review.

Mr Turnquest could not be reached for comment before press time last night, but he will likely want to ensure the bond issue’s terms and conditions to ensure they align with the 2017-2018 Budget plans now being finalised.

Should it launch according to schedule, Mr Anderson added of the bond: “I think it will be fully subscribed by Monday. We’ve got two weeks that it’s open for, but it will effectively close once we get the money.

“We’ve known about this for a long time, we knew it was coming, so we’ve been out soliciting support from various institutions for the last month or two. Given the response and indications, I don’t think there will be any problem raising the money we need. All indications are good at the moment.”

The debt financing is critical to enabling the University “to meet its charter requirements”, as the money raised will fund construction and other capital projects at its various campuses.

The term sheet for the University of the Bahamas bond issue, which has been obtained by Tribune Business, states: “The proceeds of the Series B Notes are to be used to fund various capital projects for the University of the Bahamas at its campuses throughout the archipelago of the Bahamas, thereby enabling it to meet its charter requirements as a University.”

The bond replaces the $16.1 million Caribbean Development Bank (CDB) loan that the previous government was forced to cancel, after the University of the Bahamas was unable to complete its audited financial statements and bring them up-to-date - a key condition of the loan.

With fees and interest piling up on the undisbursed loan, the University - together with the former Christie administration - decided to cancel the arrangement with the CDB and seek alternative financing sources.

The bond facility was an obvious source, given that an $18.3 million tranche remained to be placed following a previous $31.7 million issue, which refinanced bank debt taken on for the Harry C. Moore library’s construction and other capital projects.

“They’ve got various projects they’re looking at funding, general projects and funding issues,” Mr Anderson added of the University’s latest capital call. “People want to support the country’s University, so we got a good response that way.”

The bonds, which carry a 6 per cent annual interest coupon, and a maturity of 15 years, “are not secured by any specific collateral”.

However, the term sheet confirms that the Government has provided a ‘comfort letter’, or ‘Letter of Acknowledgement’, confirming it is aware of the $18.3 million issue and the “obligations and liabilities” it imposes on University of the Bahamas.

“It [the Government] is aware and acknowledges that the delivery of an executed copy of this letter is one of the conditions precedent to the issuance of the notes, without which it would not be possible to proceed with the offering,” the term sheet says.

While the University of the Bahamas will be responsible for paying the principal and interest to investors, the term sheet adds: “The University is a statutory body under the fiscal control of the Government, and the Government shall retain fiscal control of the University throughout the term of the notes.”

Mr Anderson said the ‘Letter of Acknowledgement’ had been provided “before the previous government left”, and added: “We’ve had it for the last few weeks.”

Its issuance, and terms, are likely to have attracted Mr Turnquest’s attention for review.

The $18.3 million bond issue is a private placement targeting selected institutional and high net worth investors only. Members of the public should not apply.