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$70m Aliv Exit Delay On Cabinet Queries

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Gowon Bowe

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s exit from its $70m majority ownership of Aliv has been delayed by the Cabinet’s desire for “clarity and comfort” on the chosen route.

Gowon Bowe, pictured, one of the advisers to the planned sale, told Tribune Business that Cabinet ministers had submitted “detailed questions that needed answering” on the private placement offering model that was originally selected as the Government’s exit route.

He disclosed that the queries had focused on whether a private placement to Bahamian institutional investors was “the only option” available to the Government, and how this “fits in” with the laws and regulations governing such offerings.

The Government would exit 51.75 per cent ownership in Aliv, the second mobile operator, by selling off HoldingCo, the vehicle that holds this equity stake, and Mr Bowe said the advisers were now awaiting “clear instructions to proceed” from the Minnis administration.

He added that the Government had been warned it can ill-afford to cause “confusion and ambiguity” among institutions already approached as potential investors, with lengthy delays also likely to cause a reduced appetite for participation.

Mr Bowe said he and fellow offering advisers would be “happy with [Cabinet] consensus”, and did not require unanimity, as they were ready to move “with haste” in placing HoldingCo’s shares once the go-ahead was received.

The Government inherited the private placement model from the Christie administration, which had given its approval to the structure pre-general election.

“Ultimately I think the Cabinet, whilst they had agreed to primarily on the same basis they had in place, a number of questions came out from them that they wanted comfort on,” Mr Bowe told Tribune Business.

“As they started to think about it, detailed questions came up that we had to answer. We said to them that given the question process we need clear instructions to proceed, because we can’t cause confusion and ambiguity with the people [investors] involved with this. We’ve approached them on one model and process.”

The structure agreed with the Christie administration was a private placement model, where HoldingCo’s shares would be sold to a targeted group of ‘sophisticated’ institutional investors.

Those institutions are the likes of Bahamian pension funds, investment/mutual funds and credit unions - entities covering thousands of members, and thus ensuring the broadest possible Bahamian ownership and spread of benefits.

Other ‘exit’ routes, such as an initial public offering (IPO), were rejected on the basis that Aliv, as a start-up operation that will incur initial heavy losses while it completes its infrastructure build-out, was not appropriate for retail (individual) investors.

This view has been met with some public opposition, and Tribune Business sources have suggested some well-placed government members were keen on an initial public offering (IPO). Mr Bowe said one Cabinet question was whether the private placement is “the only option available to them”.

“It’s been around providing the evidence and supporting details around the various options and considerations presented to the previous Cabinet,” he explained of the ‘question and answer’ moves. “They want to be clear how the chosen path fits in, and there are no other options around given the laws and regulations that exist.

“The original [Christie] Cabinet decision and instructions have not changed. It’s just the Cabinet wanted clarity and to be properly briefed. Whilst from a commercial and economic standpoint we’d like to be out the gate and doing the placement, we are respectful of the fact the Government is the shareholder and it’s in their prerogative to make sure they understand.

“It comes down to HoldingCo and the administration communicating so there’s clarity in purpose. There’s been no objection to the information feedback. It’s just making sure they have the answers to the questions they have.”

The Government’s investment in Aliv, via HoldingCo, was always intended to be temporary. It was made to ensure the new mobile operator had the necessary financing to get its operations off the ground, and was not delayed in meeting its infrastructure build-out and licensing obligations.

Its replacement by private investors, though, has been more than two years’ in the making. The Government’s exit was delayed by last year’s general election and, despite Prime Minister Dr Hubert Minnis’s confirmation early in his administration that it would see the process through, this has yet to occur.

The Government has already cited the HoldingCo sell-off, and potential reduction of its equity interest in the Bahamas Telecommunications Company (BTC), as two events that would help it achieve the objective of creating a ‘shareholder society’ and spreading wealth creation/accumulation more widely among Bahamians.

It also represents ‘low-hanging fruit’ for the cash-strapped Public Treasury, as the potential $70 million proceeds - if fully placed - will represent a major one-time cash injection that can significantly reduce an annual deficit currently exceeding $300 million. It will thus finally enable the Government to realise the fees paid by Cable Bahamas, Aliv’s controlling shareholder, for winning the licence.

“I will be happy with consensus; I don’t need unanimity,” Mr Bowe said of the Cabinet. “What we need, by consensus, is that everyone who is a decision-maker in this process, the Cabinet, understands this is the route being taken.

“We’ve articulated to them that the more time passes, the more anxiety comes about in terms of clarity on the road ahead. Once there’s confirmation of the original decision or instructions otherwise are sent out, we will mobilise with haste to get it done.

“A lot of the leg work has been done, more information [on Aliv] is available. The framework already exists, and the build-out of the structure is easy enough once everyone is of the same accord.”

Comments

realitycheck242 2 months, 4 weeks ago

This administration needs too adjust the terms of this offering and change the Christie administration offering model to include the Small retail investors and individuals who have brokerage accounts and are interested it purchasing Aliv holding co shares. As it stands now there are thousands of Bahamians who are not apart of pension funds, mutual funds and credit unions and would like to paticipate in this offering. ...come on advisers you and the Board can convince them to change it ..If "ts the people time" Let the Institutions eyed use their funds like they traditionally do ..no one would miss their money. The offering would still be over subscribed.Convince the Gov to go the IPO route Aliv can sponsor the IPO ..they seams to have enough funds on hand to be sponsoring every event happening in this country at the moment...Staff at BTC and BEC who are getting packages can now become owners and feel like they have really accomplished something after years of hard work for those companies. Something that they can leave to their children and grand children. Only then would this truly be covering the broadest possible spectrum of Bahamian ownership and give everyone an equal chance to become a part of the share holiding society. As it stands now this offering discriminates aganist the Bahamian investing public....Fix it, make it right !

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Well_mudda_take_sic 2 months, 4 weeks ago

The costs of an IPO are absurd - only the accountants, lawyers and other professional advisers would make out like bandits. Forget the small retail investor - Cable Bahamas did little to enhance their wealth and Aliv would do even less under an IPO. A quick private placement is the only way to go. As the saying goes, government must act now while the iron is still hot. Further unnecessary delay may result in the planned Aliv private placement having a "cool" reception, with government possibly receiving much less than the currently anticipated $70 million. Minnis and his cabinet must be made to appreciate that now is the time for all hands to be on deck so that government and, by extension the Bahamian people, receive maximum value for their investment in Aliv.

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DonAnthony 2 months, 4 weeks ago

What are you talking about? Cable Bahamas did a great deal to increase the wealth of the small retail investor, it debuted with an IPO price of $1.00 and a little over 20 years later it topped out at a split adjusted price of $25 per share, that is over a 100% return every year not even factoring in dividends. The price has fallen tremendously since then but many small investors ( myself included) made a fortune off of cable. These shares should be offered in an IPO filled from the bottom up to ensure the greatest distribution of shares. This is one of the few ways for the small investor in this country to share in wealth generation. The legacy of the FNM through the port and cable IPO has been to empower Bahamians, they should do it again, rather than enriching the select few.

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Well_mudda_take_sic 2 months, 4 weeks ago

The shenanigans of successive governments centred around Phillip Keeping exiting the Bahamas years ago and the related dilly dallying with shell enterprises in Florida resulted in a hand full of Bahamians (favoured insiders) enjoying enormous investment returns to the detriment of small retail investors. I hope you're not one of those ignorant investors who believes the grossly inflated prices of public stocks published daily are indicative of true underlying selling prices or fair values of the public companies.

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DonAnthony 2 months, 3 weeks ago

You appear to be financially illiterate. Which part of a 25 fold increase not including dividends do you not understand? Not a SINGLE small retail investor ( or any investor for that matter) who purchased cable shares for $1 at the IPO lost money. In the 24 years since then the share price has never traded below $1. So your statement is false. Most small retail investors especially those who held their shares for several years made a fantastic return.

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Well_mudda_take_sic 2 months, 3 weeks ago

Your fuzzy maths may fool the ignorant but not the savvy. There's never been a public stock of any Bahamian company that has yielded over a 100% return every year for over 20 consecutive years, excluding dividends. And there probably never will be!

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DonAnthony 2 months, 3 weeks ago

You are entitled to your ignorance but the facts are: Cable Bahamas IPO share price in 1994 was $1.00. Fact. I sold cable shares in 2015 for $8.34 after a 3 for 1 split equates to (8.34x3)= $25.02 per share. Fact. More than a 25 fold increase in 21 years. If you do not understand this math best of luck to you.

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realitycheck242 2 months, 4 weeks ago

The Christie administration model for the sale of Alive shares in holding Co goes against the Minnis administration stated policy objective of creating a ‘shareholder society’ and spreading the wealth creation/accumulation more widely among Bahamians. An IPO is the way to go with bottom up distribution of the allocated shares. Alive now has a track record so the argument about not going the IPO route does not hold. Cable Bahamas took a few years before they payed their first dividends. so will Aliv. Growth in the value of the Aliv shares can be expected after the IPO and the majority can benefit.

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TheMadHatter 2 months, 4 weeks ago

Give away all the 51% shares free of charge - evenly distributed - to all illegal migrants. It's the "humane" thing to do.

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DonAnthony 2 months, 4 weeks ago

PLP administrations have done nothing to expand the shareholder base in this country, and this rigged plan they left to only offer shares in Aliv to select elite and not the average Bahamian should be abandoned. And the thinly veiled intimidation by Mr. Bowe should be ignored. These shares are very valuable and he knows it and that is why he has been pushing this rigged plan as well. Most financial opportunities in this country are reserved for an elite club and the average man is not in it. If this is offered as an IPO to the general public the offer will be oversubscribed so there is no rush, no fear of missing out. The FNM should abandon this rigged plan for the few and practice what they preach and empower Bahamians.

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realitycheck242 2 months, 4 weeks ago

Exxactly ...you can Credit the IPO's for Cable Bahamas, Commonwealth bank, Commonwealth Brewery, Arawak cay port to HAI FNM administrations.The PLP floated a plan about a Bahamas food services IPO to the Bahamain public when they were bought out by the american company Sysco foods, but just like most things they do. That was swept under the rug.and nothing has been heard from that since..

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DonAnthony 2 months, 4 weeks ago

Yes, and add to it the 9% in BTC shares Ingraham planned to offer the public if re-elected. Swept under the rug and abandoned by the PLP.

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sheeprunner12 2 months, 4 weeks ago

DonAnthony ......... I agree with you ......... By the Minnis Government agreeing to sell shares of BTC, BPL, APD, BOB, CBL/ALIV, Bahamasair etc to the public via IPOs, this will boost the wealth of the small man ...... Unlike the PLP enriching less than 10 Numbers Boys.

This can be the single greatest policy shift to empower Bahamians beyond giving Government or hotel jobs. Making public offerings of these entities available in small lots to Bahamians will boost the value of these "white elephants" and inject new money into the Treasury and thus the economy. Right now, too much Bahamian money is locked away in banks. Bahamians are starved for viable investment opportunities.

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John 2 months, 4 weeks ago

This is no time for the government to sissy around. If it plans to release these share the time to do it is now when Aliv is beating the pants off BTC and the shares have value and growth potential. The market is very volatile and shifts very quickly as customers rally between the phone service providers. Go with the original plan then allow the targeted institutions to sell off to smaller companies and individuals.

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