The Tribune

By YOURI KEMP

Tribune Business Reporter

Bahamas Power & Light’s (BPL) chairman yesterday confirmed that local institutional investors will be able to participate in the utility’s upcoming mammoth $650m bond refinancing.

Dr Donovan Moxey, in a brief exchange with Tribune Business, said: “What I can say is the local offering of the bond will be open to institutional investors.” His comments came after himself, together with BPL chief executive Whitney Heastie and Geoffrey Andrews, head of the vehicle that will issue the National Utility Investment Bond, were spotted going into the Cabinet Office for that body’s week;y meeting.

They were followed by Dr Nicola Virgill-Rolle, the National Insurance Board’s (NIB) director, and members of her team. While she later declined to comment, Desmond Bannister, minister of works, confirmed that NIB was now mulling whether to buy into the $650m issue. He said: “NIB will review the relevant information and make their decision.”

Dr Moxey’s comments clarify growing confusion and uncertainty in the Bahamian capital markets over whether local investors would be able to participate in the BPL refinancing. While this had been the original plan, with some $100m to $150m eyed for the local market, the absence of any confirmation - indeed, any information - was fuelling growing concerns this might not happen.

Several institutional investors, speaking to Tribune Business on condition of anonymity, had voiced suspicions that Citibank, the BPL offering’s main advisor and placement agent, was seeking to place the entire $650m with the international capital markets in US dollars and not allocate any portion locally.

That appears to longer be the case for the National Utility Investment Bond, which is seeking to raise financing for repaying BPL’s legacy $321m debts as well as provide capital for major infrastructure upgrades.

Dr Moxey and Mr Andrews previously met in New York with the credit rating agencies in a bid to obtain a credit rating for the bond issue, which they are aiming to place by the first week in January. Capital markets sources, though, have expressed scepticism about this timeline on the basis that credit ratings typically take longer to obtain than just several months.

Mr Andrews, though, told Tribune Business previously: “We did have some meetings in New York, and we all felt - and our advisors told us - the meetings seemed to have gone well and were well received. We were meeting some of the rating agencies.”

This included the likes of Fitch, Moody’s and Standard & Poor’s (S&P), as they sought to make the case as to why the National Utility Investment Bond issue should receive an “investment grade” rating indicating that the borrower is sufficiently strong with good creditworthiness.

Obtaining a strong, “investment grade” type rating for the bond issue is critical for Bahamian households and businesses as this will determine the price (interest rate) that will be attached to these debt securities.

Much like how the rating agencies assess The Bahamas’ sovereign creditworthiness, an ‘investment grade’ rating indicates confidence in a borrower’s ability to repay its debt and ensures access to lower-cost debt capital, whereas a so-called ‘junk’ rating - like this nation has now from S&P - will result in having to pay investors higher interest rates to compensate them for the increased risk.

However, if the BPL bond can only obtain a ‘junk’ rating this will increase the price demanded by investors, meaning Bahamian households and businesses will have to pay higher bond servicing fees. “It hinges on the rating we get,” Mr Andrews confirmed to Tribune Business of the bond’s pricing.