• Chairman: ‘We’re doing everything we can’
• As scepticism grows following missed dates
• End May/early June targeted for placement
By NEIL HARTNELL
Tribune Business Editor
Bahamas Power & Light (BPL) is racing to get its $535m refinancing “across the finishing line”, its chairman said yesterday, amid growing scepticism over whether the bond issue will actually happen.
Dr Donovan Moxey told Tribune Business the state-owned energy monopoly and its financial advisers had “made significant progress” in preparing the rate reduction bond (RRB) for launch to local and international investors despite missing several issuance dates already this year.
However, he dismissed growing speculation that the bond - which he described as “critical” to placing BPL on a sustainable financial footing - will not take place, although he declined to provide a launch date on the grounds that previous ones have been missed.
“We are doing everything we can to get this completely across the finish line,” Dr Moxey told this newspaper. “We have made significant progress and are moving forward. I don’t know why anyone would have the basis to say it’s not going to happen.
“All I can say is that things are moving forward positively. We’re working as hard as we can to get the bond launched.” He added that the bond issue’s joint “book runners” and placement agents, CIBC FirstCaribbean and Citibank, would confirm a closing date once it launched.
Tribune Business sources, speaking on condition of anonymity, yesterday suggested that BPL’s $535m refinancing was now targeting a late May/early June launch, but added that they would not be surprised if this timeline slipped further given that it has has already missed several previous launch dates in early 2021.
They suggested that the bond was still awaiting sign-off and approval from the likes of the Ministry of Finance, Attorney General’s Office and Central Bank. In the latter’s case, this newspaper was told that it was especially mindful of how future repayments to international investors will impact the external reserves post-COVID given that $450m will be placed outside The Bahamas.
“They now think they’re going to get it done at the end of May or early June,” one contact told this newspaper. “It’s all procedural issues that have to get done. I understand that it’s now expected to close somewhere around the end of May, with interest rates of around 7.75 percent for the local market and 8.75 percent for international.
“They’re still in the process of tying down final details and amounts. It’s being finalised.” Dr Moxey, though, declined to be drawn on these developments, saying: “I’m not going to confirm any of that.
However some sources, speaking on condition of anonymity, yesterday voiced growing doubts that the bond issue will be placed despite the chairman’s reassurances. “I question how that’s going to happen any more, and how they are managing thus far without it,” one added.
Others questioned whether BPL was sufficiently attractive to investors, given the multi-million dollar losses it has racked up over the past 14 years, to ensure the $535m will be fully placed even at those relatively high interest rates - especially since it has yet to demonstrate a turnaround strategy that is delivering significant results for the bottom line.
Dr Moxey acknowledged that BPL’s immediate and long-term future revolves around a successful bond placement. He told Tribune Business: “This is very important and very critical to what we are trying to do strategically at BPL in terms of making the right investments and ensuring the company gets on a firm financial footing so it can be sustainable in its business operations.
“We’re completing all the requirements necessary to get this done. BPL has been in a challenging situation for several years. This has been a solution contemplated since 2015, 2016 when the Rate Reduction Bond legislation was first introduced, but somehow we could never get it done. We’re in a position right now where it’s extremely important to get it done, and we’re applying all the resources necessary to make it happen.”
The fate of planned reforms to the Rate Reduction Bond Act, also deemed key to enabling BPL’s mammoth refinancing to be placed in both the local and international capital markets, is presently unclear. Those changes were designed to give potential investors sufficient security and confidence to buy in, but Desmond Bannister, deputy prime minister, could not be reached for comment yesterday.
Tribune Business had also disclosed in mid-March that CIBC FirstCaribbean had been conducting a so-called “market read” to determine the appetite and level of interest among Bahamian investors for the $85m that will be placed locally.
It is understood that major institutional investors and investment banks were approached to give an indication of how much they, and their clients, would be willing to take-up as well as the interest rate, maturity and other commercial terms that would entice them to buy in.
Mr Bannister previously said BPL “is very attractive to investors” even though many observers would argue this is unlikely given its consistent losses coupled with concerns about poor service quality, frequent power outages and aged transmission and distribution infrastructure that the bond financing is to help replace.
He added: “BPL already has an indication of what the credit rating agencies are thinking. They’re just waiting to start the process, but already have good indications of how they will be rated by the agencies. They already have an indication of what the interest rates are going to be.”
Those interest rates, in turn, will be key to determining just how much Bahamian households and businesses will have to pay to service BPL’s bond debt via the National Utility Investment charge that will be added to their bill once the issue is placed with investors.
BPL initially estimated that consumers would have to pay a charge equal to 15 percent of their monthly consumption, but that was some time ago and this amount may have changed. Proceeds from the bond issue will be used to refinance and replace BPL’s existing $320m-plus debt, as well as fund upgrades to its substations and transmission and distribution networks.