The Tribune

• No investor dividend before 2025 as long-term play

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamians were yesterday told the $25m initial public offering (IPO) of a 49 percent stake in Nassau Cruise Port’s operator is “not for someone looking to make a quick buck”.

Michael Maura, the cruise port’s chief executive, speaking to Tribune Business before today’s IPO launch, said it should be viewed as a stable “long-term investment” given that the offering memorandum discloses that no investor dividends will likely be paid before 2025.

Urging Bahamian retail, or individual, investors to “have their eyes open” and ensure the IPO matches their risk appetite by fully reading the offering documents, he reiterated: “This is not a short-term win. If someone is looking to make a quick buck, this is not the place to do it. In my opinion, this is a sustainable long-term investment.”

Bahamian investors are being offered the chance to acquire shares in the Bahamas Investment Fund (BIF), a mutual fund or pooled investment vehicle that will collectively own a 49 percent ownership stake in the Nassau Cruise Port, operator of Prince George Wharf. They will not directly hold shares in the operator itself.

Shares will be priced at $5 each, with 5m in total offered. The minimum investment is $1,000 in BIF as the offering adopts a ‘bottom up’ approach targeting smaller retail investors first before institutions such as pension funds and insurance companies come into play.

CFAL representatives, acting as advisers to Nassau Cruise Port, said the latter’s 25-year concession to operate and manage Prince George, which starts when construction ends in 2022-2023, should provide attractive long-term returns with an “average yield” of 10 percent per annum. This could increase after the 10-15 year mark, as interest costs decline due to debt repayments.

Anthony Ferguson, CFAL’s principal, who will also sit on the Bahamas Investment Fund’s Board, told Tribune Business he was optimistic that the IPO will be fully subscribed despite the tight eight working days given to place it. The offering is due to close on December 17, and comes as the approaching Christmas holiday begins to divert attention.

“We’re pretty confident it will go extremely well,” he told this newspaper. “It’s an infrastructure play in the largest industry, which is tourism, and the largest infrastructure project since the airport. We think it’s in the perfect wheelhouse for retail investors.

“The one caveat is that we don’t expect to pay a dividend until late 2024/2025. Persons have to look at their financial situation and make a determination. It’s a long-term investment but, right now, they are getting zero at the bank.”

Antoine Bastian, Genesis Fund Services’ principal, and another Bahamas Investment Fund director, said the likely three-four year wait to receive a dividend from the Nassau Cruise Port stood up well against many worldwide infrastructure projects where investors could wait up to 15 years for a return.

Mr Ferguson, meanwhile, said the $10m facility being made available by Global Ports Holding, Nassau Cruise Port’s 49 percent shareholder, to enable Bahamians to acquire shares in the IPO will be “primarily reserved” for civil servants and government employees.

Angelo Butler, a senior CFAL analyst, said the cruise port’s financial advisers had “reached out to a few other employers” to see if they would be willing to facilitate their staff’s access to the $10m facility but none wanted to provide a guarantee that would secure repayment of the monies advanced.

The $10m facility could potentially enable participation by up to 10,000 Bahamians, based on the minimum $1,000 subscription, and Mr Maura said: “The challenge is, as Angelo articulated, are private sector employers prepared to guarantee the debt.

“The hope is that as many people as possible that can invest, and for those who it’s the right investment opportunity, participate, and those that qualify are able to get it to help. It’s just a tough time. Businesses have gone through a very tough time, and very few employers are prepared to guarantee the money to repay the loan. One of the things we do know is that the Government does that, and the Government have indicated they will do that.”

Mr Ferguson, confirming that Bahamian investors will pay the same $5 per share price as Global Port Holdings will contribute for its matching $25m equity stake, said anything below that price was “de minimis”. He added: “We felt that was a good round number, equivalent to 200 shares.”

The CFAL chief also explained why the IPO had been structured such that Bahamians will be investing in the Bahamas Investment Fund as opposed to buying into Nassau Cruise Port directly. Unlike a direct issuance of shares, where persons have to pay a $50 fee to trade them via BISX, he said the fund structure ensures Bahamians will incur no subscription or redemption fees.

“We want the investment to work 100 percent for every retail investor,” Mr Ferguson said. And Mr Bastian added that the fund structure “gives a level of comfort and safety to investors” since the BIF will be regulated by the Securities Commission. Owen Wells, attorney and partner at McKinney, Turner & Co, is another BIF director.

The Nassau Cruise Port’s success will be driven by the volume of passenger and ship arrivals, rather than visitor spending and yields, unlike many other sectors of the tourism industry. As a key infrastructure asset in The Bahamas’ largest industry, and an effective monopoly with no obvious competition, its income streams should be relatively stable.

The cruise lines, due to the US Jones Act, which requires foreign-flagged vessels to visit overseas ports before returning to their US home base, have little choice but to come to The Bahamas for the short three, four and five night cruises. And, as part of their private island deals, they are also required to call in Nassau and Freeport.

The IPO’s offering memorandum will be published this morning on the Bahamas Investment Fund’s website, www.bahamasinvestmentfund.net. The IPO is the first in The Bahamas since Arawak Port Development Company’s (APD) in 2011, and the Nassau Cruise Port is likely looking for a similar outcome where 11,000-12,000 shareholders were attracted.