BPL races to get $535m bond ‘across finish line’


BPL chairman Donovan Moxey.

• Chairman: ‘We’re doing everything we can’

• As scepticism grows following missed dates

• End May/early June targeted for placement


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.


Clamshell 2 years, 4 months ago

Translation: Let’s borrow half a billion dollars so we can continue to not keep the lights on.


DiverBelow 2 years, 4 months ago

There are serious alternatives to such high interest loans, to be paid by the consumer, Bahamians are hurting. Natural Compressed Gas is considerably cheaper for the consumer & much better for the equipment & environment. No re-inventing the old broken wheel, a good interim technology till solar and battery storage are efficient & economically viable. Florida Power & Light knows. Follow the $$$, bond brokers commissions & fees... you will pay these.


TalRussell 2 years, 4 months ago

Comrades caught in desperation cash crunch over at BPL,now that Obadiah has somehow or the other, hoodwinked his House-seat reservations out "Brave," you might want to ask the Office of Thee Mr. Minnis (OTMM) for the $600 million, they'll no longer have to spend win seats on Grand Bahama, and before they hand it over to some redcoaty loyalists to modernise Thee Mr. Minnis, pre-general election propaganda Obadiah/data stack. Yes, just shouldn't be making this Obadiah/data stuff up on the go.


John 2 years, 4 months ago

Call it a PONZI scam. They are in a cash crisis. So they borrow money at a high interest rate to help with the cash crisis. BUT they realize high interest rates will add to their cash crisis. At least the management of cash. So they involve the consumers. Promising lower bills but not making substantial changes to their production model to guarantee lower rates. So what happens in a few years? Another cash crisis. Them more borrowing. Rates go up and the consumers are locked in ffir additional years on a higher interest bond. Spinning tires in the dark?


Dawes 2 years, 4 months ago

We are a pathetic country. This has been going on for over 5 years and still not resolved. Can anyone in Government run companies actually do anything. Can our government do anything with sense? Also why in the world would you place a bond with over 8% interest for the foreign investor when they can't get anywhere near that interest rate in the US? Does the Government realize that interest rates are at historic lows at the moment so they don't need to pay rates that were paid out 10-20 years ago?


TalRussell 2 years, 4 months ago

Comrade Dawes, run line through the 8%. Pretty certain the red regime just borrowed/renewed/floated a loan at 12%, yes?


Emilio26 2 years, 4 months ago

Dawes the reality is BPL should've been privatized from the last Ingraham administration.


KapunkleUp 2 years, 4 months ago

That probably the 'risk premium' demanded by potential buyers. BPL/Bahamas ain't exactly what you would call a low risk investment.


KapunkleUp 2 years, 4 months ago

So almost 60% of this new debt is going to be paying off old debt and the rest is being used to "upgrade existing infrastructure". Pathetic!


Maximilianotto 1 year, 11 months ago

Such a nonsense. It’s sugarcoating of price increases to continue as ever until total collapse of BPL.


Sign in to comment