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‘Get Off Sidelines’ On $200m Raises

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Michael Anderson

• Investors told: ‘Put capital to work’ in 2022

• Banker: Otherwise ‘economy cannot grow’

• $130m in deals expected during first half

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Investors were yesterday urged to “put capital to work” for The Bahamas to escape a post-COVID slump as more than $200m worth of projects prepare to come to market in 2022.

Michael Anderson, RF Bank & Trust’s president, told Tribune Business that “the economy cannot grow” if companies and investors remain “waiting on the sidelines” reluctant to take advantage of opportunities in a post-pandemic recovery.

Disclosing that he was aware of two offerings, collectively worth $130m, that will be released to the Bahamian capital markets during the 2022 first half, he added that such increased activity is vital if the country is to diversify away from its reliance on tourism.

While predictions that increased capital-raising activity would start in 2021 have not materialised, Mr Anderson voiced optimism that multiple projects delayed either because of COVID or the recent general election will now move forward in 2022.

“I think there are a number of transactions that were put on hold because of election issues, because of COVID economy issues that, as the economy and tourism start picking up, some of those will come to fruition next year,” he told this newspaper. “We expect to see a recovery on the capital raising side next year. The early signs are positive.

“There’s been very little activity for the last two-and-a-half years other than the [$130m] Nassau Cruise Port transaction, which required a lot of capital to get raised. A lot of investors are waiting on the sidelines, so we anticipate next year will be when a lot of these deferred projects come back and start to move forward again.”

Such projects include the $150m that RF Bank & Trust was scheduled to raise to finance the Family Island airport upgrades, which is a project presently undergoing a review by the newly-elected Davis administration.

And, while Bahamas Power & Light’s (BPL) proposed $535m rate reduction bond (RRB) initially appeared to have been killed-off by the new government, recent signs suggest it is not totally dead given that the Deloitte & Touche accounting firm has been called in to review the proposal.

The Government is also still talking to Shell North America over the planned new power plant, and liquefied natural gas (LNG) terminal, at Clifton Pier. The Shell deal is heavily tied to the bond’s placement, and the latter - at $80m - as well as the LNG facility will both seek to raise financing in The Bahamas via the capital markets.

This newspaper understands that Grand Bahama Shipyard, too, is likely to seek up to $80m in financing locally to carry out preparation works for receiving two new dry docks that are currently being built in Asia.

And, with $2.4bn worth of surplus liquidity clogging the commercial banking system, and deposit rates at or close to zero, Mr Anderson argued that there was no better time for investors to shed their traditional caution and conservatism by investing in equities and the broader capital markets.

“There are a couple of transactions worth $130m between them that we expect to take place in the first six months of next year,” the RF Bank & Trust chief said, declining to identify the parties involved. “We expect more of those transactions to come online as time moves on but, at the moment, we anticipate those two transactions taking place in the first six months of 2022.

“People coming to market, raising cash and starting to grow the economy..... These are integral requirements for the economy to grow again, to start to regenerate. Without capital getting put to work the economy cannot grow. We need to see more of these projects come out next year so the economy is not so reliant on tourism.

“We will start to see broader economic growth take place if we get more capital deployed. If money is sitting on the sidelines, sitting in the bank, people will not do well. It’s about how we put it to work, put money to work and get companies going again.”

Asked how much will be sought from the Bahamian capital markets next year, Mr Anderson replied: “I think if we’re looking at $130m in a couple of transactions, I can imagine at least a couple hundred million. It could easily be more.”

He added that it was critical to get capital into cash-starved Bahamian businesses, especially small and medium-sized enterprises (SMEs), and predicted that 2022 could see increased merger and acquisition (M&A) activity at this level amid projections the economy will grow by over 8 percent.

While tourism’s recovery had provided some “headroom”, Mr Anderson said it was now critical to reduce unemployment and get the private sector “back up and running” as rapidly as possible. “There’s some doubt around how quickly unemployment will be reduced, and businesses will get back into operation,” he added.

“A lot of small businesses are in need of capital and have been struggling to keep afloat over the last couple of years. As the New Year starts, can we get capital into businesses and are there going to be mergers and acquisitions as people get back into business? There’s this expectation we will not fully recover until 2023 or 2024.

“Next year will be the start of it, but how quickly do we get people employed? There’s a government that cannot borrow more money. We have a government that is constrained and a country that has not had a lot of employment for a while,” Mr Anderson continued.

“Things are kind of stacked up against it apart from the tourism side. There’s this one major sector which everybody is relying on to give a bit of a kick-start in the first quarter of next year going into summer.”

Mr Anderson said BISX-listed, dividend yielding stocks - especially the banks, apart from Commonwealth Bank - had started to post improved results as well as continuing/resuming dividend payments yielding 3-4 percent.

“It’s the smaller businesses that are going to struggle to get going again,” he said, “but most of the larger listed companies are looking good already.”

Comments

tribanon 2 weeks ago

These guys typically make out like bandits, but not the small fry investors who listen to them. It's always too easy to put your hard earned money into an investment they tout, but then it becomes next to impossible to get your money back based on the value they tell the public your investment is worth. LOL

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realitycheck242 2 weeks ago

Every year less than ten percent of the investments he predicts come to market. While it is critical to get capital into cash-starved Bahamian businesses, especially small and medium-sized enterprises (SMEs), More emphasis needs to be placed on educating the investing public about how risky iinvesting is.

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John 2 weeks ago

They always tell you ‘only invest in the stock market what you can afford to lose’. And many who have been living by that rule of thumb have seen their investments grow substantially with minimal losses. The local market is not as volatile as other larger markets and to give examples of good and bad performances. Arawak Port Development went from $10 a share to current value of $ 40 a share , while paying healthy dividends even through the pandemic. Freeport Concrete, on the other hand shafted Bahamians leaving the market owing millions of dollars to shareholders. One of the principals was later involved with Robin Hood, then ‘Everything Must Go.’ He may have eventually been deported from the country because of his shady dealings. Beware of foreigners in a coat suit and with a brief case . That’s probably all they own.

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DonAnthony 2 weeks ago

8 out of a possible total of 20 stocks listed on BISX have returned 20% or more this year ( capital appreciation and dividends). Contrast that with banks that are paying little or zero ( in the case of RBC) on deposits. Anderson is right people need to educate themselves and put their money to work. Sitting in case with hyper inflation eroding your assets is asinine.

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realitycheck242 2 weeks ago

DonAnthony .....with your expertise .....Can you shed some light on why FCIB share price is more stable and is as high as 11:30 today on BISX and Commonwealth Bank share price fluctuates more and is as low as 2:55 today even though both Banks have experienced the same effects from customers during the Pandemic?

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DonAnthony 2 weeks ago

All of the banks have recovered to pre pandemic levels sans commonwealth bank. It comes down primarily to the nature and quality of the various loan books. Commonwealth bank favors consumer loans and were more exposed than other banks to the hotel industry and tourism workers, while other banks portfolios were more heavily weighted to government workers, who were far less impacted by job losses during the pandemic. So while other banks have begun to write back loan loss provisions they booked during the height of the pandemic, commonwealth bank still continues to set aside huge loan provisions (over 100 million in last year and a half). Eventually commonwealth bank will write back some of these provisions and return to profitability as the economy and specifically the tourism sector recovers. But they are lagging the other banks terribly right now (Fidelity bank $17.7 million net income through 3 qtr compared to a $24million loss for commonwealth bank.)

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tribanon 1 week, 6 days ago

You obviously haven't had much experience in trying to sell shares at BISX listed prices. There's little or no liquidity in the market for shares listed on BISX. If you ever need to sell your shares on an urgent basis, for whatever reason, you can count on having to take a major haircut on the BISX price to make it happen. And let's not forget that many of the listings have a controlling shareholder directly involved in managing the listed enterprise which means you're along for whatever ride that 'managing shareholder' chooses to allow you to have.

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John 2 weeks ago

And remember Commonwealth Bank wasn’t giving out consumer loans as much during the pandemic because everyone or most people were locked down and didn’t need them. But as the economy opens, commonwealth Bank’s loan portfolio will expand and drive profits probably to new heights. Many people forget there is NO RECESSION! In fact there is a shortage of goods and services and it is leading to hyperinflation or even run-a-way inflation. And as Joe Biden starts to spend his Trillion plus restructuring budget, even more money will hit the economy ( yes here too). The shortage of labor in the US will not only drive up the cost of wages, but it will draw workers from places like The Bahamas, Haiti, Mexico etc. so the demand for goods and services will increase even more. And if the shipping blockage (intentional or not) is not fixed sooner rather than later, the consequences. Most likely stagflation, and even riots at some point.

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realitycheck242 1 week, 6 days ago

The forth Covid wave which is presently in Europe and is projected in the US with rising cases already starting to rise in a few dozen states, will have a negative effect on many economic predictions.

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