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‘Appetite for more’: Deals for $150m in capital eyed

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Michael Anderson

• Investment bank ‘working on’ three more issues

• Believes all will reach market by 2022 year-end

• RF chief asserts BISX-listed stocks rebounding

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based investment banker has revealed three further capital raisings, each worth between $20m-$50m, are set to launch this year while asserting: “There’s definitely appetite for more transactions.”

Michael Anderson, RF Bank & Trust’s president, told Tribune Business in a recent interview that Cable Bahamas’ successful preference share refinancing showed there was pent-up demand for new offerings with public company share prices starting to rebound from COVID-19’s devastation.

The BISX-listed communications provider raised an extra $50m, in addition to convincing investors holding its Series 5 and Series 9 preference shares to rollover $161.7m of their existing $169m outlay, which he said showed “strong support from the Bahamian capital markets for new offerings”.

“This is the first offering since the cruise port got done [in 2020],” Mr Anderson told this newspaper. “I think there’s been a build-up of Bahamian dollars in the market in anticipation of new investments, which for the last couple of years have been delayed for one reason or another. There’s anticipation of new deals coming to market, and a fair amount of money looking for investment opportunities, and this was the first one to be done.

“There was a high level of interest, and the fact Cable got $50m in addition to the rollover is indicative of strong support in the Bahamian capital markets for new offerings. We see it as a good sign for other issues to come to market. There’s a high level of liquidity and we expect to see more investments come to market over the course of the next six months to a year, and believe the market will receive them well.

“There’s definitely appetite for more transactions. We’re working on two or three other offerings that could take place this year. There’s at least three other transactions that we think could come to market this year and be anywhere between $20m and $50m. All of them are credible issuers. We used to raise $10m and think that was large, and it’s amazing to think over the last 20-odd years how things have changed.”

Mr Anderson declined to identify the three companies involved, but one is almost certainly Doctors Hospital. Dennis Deveaux, the latter’s chief financial officer, confirmed to Tribune Business last month that RF Bank & Trust has been hired to advise on a capital raise with details likely to be revealed to the market during the present 2022 third quarter.

The BISX-listed healthcare provider is thought to be considering raising equity capital, either via a rights issue to existing shareholders, making stock available to new investors or a combination of the two as it moves to execute on its expansion plans.

Another of the three referred to by Mr Anderson is understood to be the Grand Bahama Shipyard, which needs Bahamian dollar financing for site preparation work ahead of receiving its new dry docks. The third entity is unknown.

The returns offered on equity and debt/preference share issues will likely remain attractive to Bahamian institutional and retail investors seeking greater reward because bank deposit rates continue to be minimal. Unlike in the US and other major developed markets, which are increasingly in inflation-fighting mode, the Central Bank of The Bahamas shows no signs at present of following their lead by raising interest rates.

Besides capital raising, Mr Anderson also predicted that mergers and acquisitions activity will increase as businesses seek “to start up again now that COVID’s gone”. And he forecast that The Bahamas’ post-pandemic rebound, driven largely by tourism’s recovery, has also generated an improvement in the share price of many BISX-listed companies.

“There’s been a recovery in stock prices over the last six months,” the RF Bank & Trust chief said. “Investors are coming back into the market to pick up stocks as they see results improving and dividends being paid. There’s a recovery taking place at the company level and also investors wanting to participate.”

He added that the rebound was especially noticeable in the share prices of BISX-listed commercial bank stocks, with the sector’s results having rapidly rebounded from peak COVID losses due to the economy’s reopening and borrowers being able to service their loans once again. As a result, commercial banks have been able to recover previously-booked loan loss provisions and return to profitability again.

Mr Anderson said Fidelity Bank (Bahamas) share price had jumped from $14.91 at the start of 2022 to its present $17.26, while CIBC FirstCaribbean’s stock has risen from $12 to $16 - an increase of one-third - over the same period. RBC FINCO and Bank of The Bahamas have also seen, albeit more modest, share price appreciation over the same period.

The stock market rebound, he added, has not just been confined to banking stocks. Commonwealth Brewery, the Kalik maker, has seen its share price rise from a 52-week low of $5 to $9.33 at present, close to the heights it reached within the last year, while Cable Bahamas’ ordinary shares - which started the year at $3.13 - are now at $3.95, a rise of 82 cents or 26 percent.

Despite fears that inflation, and the US policy response of raising interest rates, will depress the tourism economy amid growing talk of a recession in The Bahamas’ major source market, Mr Anderson said he felt The Bahamas’ recovery has sufficient momentum to shrug off any negative fall-out through the 2022 winter season.

Pointing out that the Bahamian economy tends to lag six to nine months behind events in the US, he added that any fall-out locally may be mitigated if the US gets on top of its inflation and price spike by early next year. He suggested that the problems were largely being caused by post-COVID supply chain bottlenecks and shortages, which were failing to match demand, rather than the latter being excessive.

“We may see that pick-up in tourism not fall off that much and continue into next year,” Mr Anderson said, adding that this will ensure the industry’s momentum - and that of the Bahamian economy - remains relatively robust through summer 2023. “My sense is that the drop-off will not be too significant.”

Oil prices, too, may ease if there is a resolution and peace agreement related to Russia’s invasion of Ukraine, which will help lower fuel costs in The Bahamas and rest of the world.  

Comments

tribanon 1 year, 7 months ago

RF Bank & Trust is capitalising on the fact that Bahamian investors no longer perceive debt instruments of any kind issued by the government of The Bahamas to be creditworthy investments.

This bonanza for RF Bank & Trust will continue until Bahamian investors wake-up and realise the real risk associated with any investment denominated in Bahamian dollars. Both the size of our government and our national debt continue to grow exponentially, and the sensible among us know there can be only one outcome to this dismal state of affairs given our nation's very fragile exchange control regime.

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