By NEIL HARTNELL
Tribune Business Editor
Bahamian institutional investors will be invited to raise 40-50 percent of the cruise port’s $100m bridge financing facility, with its developer pledging yesterday: “We’re taking Nassau from 1.0 to 10.0.”
Michael Maura, Nassau Cruise Port’s chief executive, told Tribune Business that its ultimate parent wanted Prince George Wharf’s $250m transformation to be its “signature” product and “most fantastic experience and product” out of all the 16 other ports it owns and manages worldwide”.
Revealing that Global Ports Holding is not aiming just to “go from Nassau 1.0 to Nassau 2.0” with the cruise port’s conversion to a destination product, Mr Maura confirmed that its Bahamian subsidiary - of which it owns 49 percent - is currently in the market to raise the necessary funding to kickstart construction work early in the New Year.
“The chairman of Global Ports [Mehmet Kutman] wants this to be the most fantastic experience and product that he has done to date,” the Nassau Cruise Port chief said. “It’s his signature. He’s not holding back. If you were at dinner last night to see some of the stuff he’s got planned for this thing you wouldn’t believe it.
“It will cause people to hop on the plane to Nassau. We’re not going from Nassau 1.0 to Nassau 2.0. We’re going from Nassau 1.0 to Nassau 10.0.”
Anthony Ferguson, CFAL’s (the former Colina Financial Advisors) principal, told this newspaper that “everyone” among the Bahamian broker/dealer and institutional investor community will be given the chance to participate in the cruise port’s financing plans.
He revealed that $40m to $50m of the bridge facility will be raised from the Bahamian capital markets, with these investments ultimately rolled into the debt component of The Bahamas Investment Fund. This entity, which will be created and administered by CFAL as the Nassau Cruise Port’s financial advisers, will own 49 percent of the redeveloped port’s operating company.
Mr Ferguson also disclosed that The Bahamas Investment Fund’s equity component will seek to raise between $30-$35m when it is placed towards the end of 2021. Global Ports Holding is aiming to attract “20,000-plus” Bahamian retail investors to invest in the Fund, with Mr Ferguson yesterday pledging that this will ensure “no one owns 5-10 percent of it”
The current bridge facility is designed to provide Nassau Cruise Port with the required construction financing until The Bahamas Investment Fund’s equity and debt components, representing around $100m in capital, are placed with local investors.
Mr Ferguson voiced optimism that the first $20m in “bridging” credit will be placed “within the next month”, while arguing that the bridge facility’s structure appeared to have been misunderstood by several capital markets players. This had led to concerns and criticisms that some Bahamian finance houses and institutional investors were being excluded from participating.
However, he explained that the $100m financing would be raised and drawn down in stages, since Nassau Cruise Port and its parent did not need the full amount to start Prince George Wharf’s redevelopment towards the 2020 first quarter’s end.
The CFAL chief said the initial $20m raise would only include a minor Bahamian dollar component of around $4-$5m, with the majority raised internationally in US dollars. The relatively small local first-round raise, he suggested, required participation from fewer institutions and may have created the false perception that only a narrow circle of investors would be invited to become involved.
“Everyone will participate. We will approach institutions like Providence Advisors, RoyalFidelity, Leno and Family Guardian, all the BISX member broker/dealers, to see if they will participate in the bridge facility,” Mr Ferguson told Tribune Business.
“Knowing there’s a lot of pension funds and institutions out there, we said to the team we want to have access to being part of the bridge and not just be part of the equity and bonds that will not come until the end of 2021.”
Explaining why the bridging facility will be placed in phases, Mr Ferguson said it made no sense to raise $100m in one go and then leave a substantial portion of it sitting in the bank unused while Nassau Cruise Port had to pay interest on it.
“The bridge is going to be drawn down in phases,” he confirmed. “It’s not going to raise all the money today and pay all this interest, then not use it for nine to 12 months.
“The bridge is going to be placed over the next 12 months in draw downs. The initial one is going to be $20m, and the next one will be in March, I believe, for $30m. In the first instance it’s going to be mostly US dollars; the Bahamian dollar component is going to be around $4-$5m.
“When we increase the Bahamian dollar allocation is when we will go out to the rest of the broker/dealers and see if they want to participate or not. The maximum bridge for the Bahamian dollars will be between $40-$50m, and those persons will roll over into the debt” portion of The Bahamas Investment Fund when that is placed.”
Mr Maura confirmed that the bridge facility’s placement, and Nassau Cruise Port’s capital calls, will be “aligned with the progress of the project”. Mr Ferguson, meanwhile said the financial structuring was designed to “take out all the risk” for Bahamian investors - especially the smaller retail ones - and be mindful of the pressures on the country’s external reserves.
He added that one factor behind why the initial $20m bridge raise is predominantly in US dollars is a desire not to place any further strain on The Bahamas’ foreign currency reserves at a time when they are being impacted by the traditional Christmas season draw-down and Hurricane Dorian.
And, explaining why The Bahamas Investment Fund’s debt and equity components will not be placed until construction at Prince George Wharf is nearly complete, the CFAL chief said: “The reason is we want to take out a lot of the risk.
“We don’t expect to come out with the bond until the end of 2020 to mid-2021. When we go out there and issue these bonds you’ll see the new structures, the new pier, so you will know your money is already safe as the project is 90 percent complete.”
The Government, as it did with the Aliv mobile operator, has said initial public offerings (IPOs) of equity investment interests will not occur until the subject company has built up an established track record of financial performance. Reflecting this, Mr Ferguson said the Bahamas Investment Fund’s equity portion will likely not be placed until towards end-2021, although market conditions may change this.
Mr Maura said the equity offering’s “bottom up approach” will ensure every Bahamian investor receives the first $1,000 they subscribe for, adding: “The objective is to have 20,000-plus investors.” Mr Ferguson added: “No one is going to own 5-10 percent of it. It’s just not going to happen.”
The CFAL chief, though, conceded that the Government’s post-Dorian financing needs could pose “a challenge” to the finance-raising plans of the cruise port and other private investors given projections that it will need to borrow a net $1bn over the next two years to plug its fiscal deficits.
This, in theory, will create competition for investor capital and could push the price (interest rate) paid to persons providing the funding upwards, Mr Ferguson conceded.