The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau Cruise Port's ultimate parent has pledged to "guarantee" the success of its $130m bond issue by covering any capital shortfall that may exist when the offering closes at the end of this week.

Mehmet Kutman, Global Ports Holding's chairman, told Tribune Business via an Internet conference call that he will "chip in the difference" should investor demand be insufficient to raise the full amount.

Promising that he would not allow Prince George Wharf's planned $250m redevelopment to be interrupted or delayed by financing needs, Mr Kutman said he was still "fairly comfortable" that the bond will be oversubscribed after 50 percent was raised during the first week.

He spoke out after Anthony Ferguson, principal of CFAL, which is acting as the bond's lead placement agent, revealed that some investment houses/broker-dealers, which typically direct where client monies are placed, had reacted coolly to the bond offering given the multiple uncertainties impacting the global cruise industry amid the COVID-19 pandemic.

Mr Ferguson did not name the investment houses/broker-dealers involved but, apart from concerns as to the timing and extent of when the cruise industry revives - especially its return to Nassau - there are also understood to be market concerns over whether the lines will opt to call more frequently at their Bahamian private islands and reduce visits to the capital city.

Moving to reassure investors, and signal Global Ports Holding's confidence in Nassau's future cruise prospects, Mr Kutman said: "I'm fairly comfortable to say the issue will be oversubscribed but, just in case, because of issues with somebody talking badly about the deal, we'll chip in the difference. We'll make it up. This construction will be finished before my mother passes away. I guarantee this as Mehmet Kutman."

Michael Maura, Nassau Cruise Port's chief executive, told this newspaper there had already been strong investor interest in the debt finance issue, which is seeking to raise $80m in Bahamian currency and the $50m balance in US dollars.

"We're fielding a lot of questions," he said. "It wasn't, I don't think, three hours had passed after the launch. By 11am on the first day we had received commitments and, in a couple of cases, actual physical cheques. Three hours after the opening we had very wealthy Bahamians, realising the significance of tourism to GDP, writing cheques without question. They just wrote a cheque.

"The fact is we have money coming in. After five days we're approximately half-way there, and we have another week. This project is so significant, and money is coming in recognising the significance of tourism that is bigger than just Nassau Cruise Port. People are investing in tourism infrastructure more so than Nassau Cruise Port the company.

"Mehmet said specifically that should there be some shortfall he is prepared to step up and make it happen. That should bring some reassurance to people dipping into their pockets as well."

Mr Ferguson, meanwhile, said the bond - which is aiming to raise enough construction financing to fund Prince George Wharf's redevelopment for the next 12 months - had "been going steady" even though some investment houses have "actively discouraged people from getting involved".

This comes as little surprise, as Tribune Business had been picking up indications of a lukewarm reaction in some quarters to Nassau Cruise Port's capital call due to its timing in the midst of the global cruise and Bahamian tourism shutdown.

With the port itself predicting that cruise passenger numbers will not exceed 2019's 3.81m until 2023, this newspaper understands that some potential investors are concerned whether there will be sufficient visitor volumes to generate the necessary interest payments to service the debt and all other financial obligations.

However, Mr Ferguson argued: "It's really solid investment. When we stress tested it, interest is not in jeopardy. This is a 20-year bond. Even stress testing it at 50 percent, interest is not in jeopardy."

He indicated that Nassau Cruise Port also has a back-up plan available to it in the form of bank financing that would likely come with lower costs (interest rates) than the 8 percent coupon yield attached to the $130m bond issue.

"There's always the intent of the original plan to have debt financing" Mr Ferguson added. "That should be easily obtainable. I've had several banks call me wanting to get involved.

"We can always go to the banks at a lower rate. We're trying to be balanced, giving Bahamian pension funds, institutional funds, a very attractive rate compared to what they're getting in the bank. "

A passenger facility charge (PFC) levied on all users of the cruise port will finance repayment of the $130m bond and an additional $80m worth of debt to be raised in 2021. The levy, which was $4 per head in 2019, is being increased to $5.50 this year and then to $8.50 per person in 2021.

From 2022 onwards, all increases will be linked to inflation as measures by the consumer price index (CPI). Any year-over-year increases greater than 5 percent have to approved by the Government as part of the agreement struck with Global Ports Holding for the cruise port’s redevelopment.

Nassau Cruise Port and Global Ports Holding executives on the call acknowledged to Tribune Business that the strength and timing of the cruise industry's return is presently unknown, although the former is predicting it will happen in the 2020 fourth quarter.

However, they all argued that Nassau and, by extension, The Bahamas, is likely to be at the "forefront" of any rebound given its proximity to the major US cruise ports and ability to offer multiple destinations. As a result, it was perfectly suited for the short-haul, three to four-night cruises likely to be favoured by passengers in COVID-19's aftermath. And just sailing to their private islands, and excluding Nassau, will not make for a viable itinerary.

The Nassau Cruise Port's $150m bond offering is a private placement, meaning that it is targeted only at select investors such as institutions (pension funds, credit unions, insurance companies etc), high net worth individuals and the investment banks/broker dealers that advise them. Ordinary Bahamians should not seek to become involved.