The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government has "fully drawn down" a $190m syndicated loan led by Royal Bank of Canada (RBC) that will finance post-Hurricane Dorian reconstruction, it was revealed yesterday.

Marlon Johnson, the Ministry of Finance's acting financial secretary, told Tribune Business that the provision of such debt financing by a group of Bahamian commercial banks showed lenders still retained confidence in the government's ability to pay its debts despite the storm's fiscal fall-out.

"We've drawn down the full sum of the loan," he confirmed, revealing that the government had obtained an interest rate of Bahamian Prime plus 0.125 percent.

With prime currently at 4.25 percent, this translates into a 4.375 percent debt servicing cost. "We're still a good customer," Mr Johnson added. "The lending community still has confidence in the government's paper.

"As the deputy prime minister would have said, we have been approached by any number of investors domestically and internationally. They retain their confidence in the government's ability to service its obligations."

Royal Bank, in a statement, said it had provided $100m - more than 50 percent - of the syndicated loan itself. The $190m loan total accounts for 37.4 percent of the government's net new $508m borrowing post-Dorian.

Mr Johnson said the $90m balance was provided by four other Bahamas-based banks. They were Scotiabank (Bahamas); Commonwealth Bank; Fidelity Bank (Bahamas); and Bank of the Bahamas.

RBC, which is the government's bank, was also quick to remind that it had led the $130m syndicated loan put together by a similar consortium of local banks to assist the former Christie administration with post-Hurricane Matthew repairs.

"Hurricane Dorian brought unprecedented levels of destruction and damage to communities on the Abacos and on Grand Bahama," said LaSonya Missick, RBC's managing director for The Bahamas.

"As an Abaconian myself, I am proud of RBC's continued commitment to helping our clients thrive and our communities prosper. I know that this loan will go a long way in rebuilding the lives of our impacted fellow Bahamians."

"Hurricane Dorian imposed significant fiscal costs on the government as we seek to provide social and economic support to residents of Abaco and Grand Bahama, and restore key public infrastructure," said K Peter Turnquest, deputy prime minister.

"The government appreciates the strong participation of representatives of the domestic banking community in our capital raising initiatives."

Brian Knowles, RBC's vice-president of corporate banking, added: "In addition to providing the bulk of the financing, RBC was pleased to lead the co-ordination efforts to help make this loan a reality.

"Support for rebuilding and recovery is essential to help get life back to normal for thousands of Bahamians, and it is something we are proud to be a part of."

Apart from the $190m loan, the government's post-Dorian financing package also comprises a $100m contingent credit line from the Inter-American Development Bank (IDB), of which 80 percent is expected to be drawn down.

The mix also includes a $50m loan from the Caribbean Development Bank (CDB), with the remaining $177.9m to be sourced via government bonds and other debt instruments.

Mr Johnson told Tribune Business that these debt securities will be placed "and drawn down according to our cash needs".

He added: "We phase our borrowing according to our cash needs, so as we continue to the process over the next two to three months we will draw down as necessary."

Not all the additional $508m net new borrowing is to cover Dorian-related reconstruction costs, though. Just under $120m it needed to finance additional spending by the government.

This includes Bahamas Power & Light's (BPL) new $30m General Electric (GE) generation unit; $30m for civil service upgrades, the bulk of which is to cover December's one-off lump sum payment; further sums for Princess Margaret Hospital repairs; and some $16.1m to regularise funding provided for the Grand Lucayan resort.