The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

A BAHAMIAN businessman yesterday argued that international investor and capital markets confidence in the country “couldn’t be clearer” after the Government confirmed its new $1.1bn bond was more than three times’ over-subscribed.

Sir Franklyn Wilson, the Arawak Homes and Sunshine Holdings chairman, told Tribune Business he had received information that The Bahamas’ latest debt financing was “all done within three hours” as he again urged citizens “to get beyond partisan politics” and acknowledge when the Government gets things right regardless of which party is in power.

“The fact of the matter is the markets think the Commonwealth of The Bahamas is in a good place,” he said. “How could it be clearer? How could it be clearer? Money talks. They don’t talk in words; they talk in money. You don’t need to be a finance guru or expert to see what this means.

“It says the Government of The Bahamas is in a good place in fiscal terms. The market is interested in fiscal terms. It says we believe the near term prospects are substantially good and we are prepared to lend you more than you were seeking to borrow.”

The Government, in a statement confirming Tribune Business revelations that it had placed a $1.1bn due to mature in 13 years’ time in 2039, said the “peak order book” was around 3.2 times’ over-subscribed. It added that this strong investor demand had allowed it to reduce the interest rate payable on the bond by 40 basis points - from the forecast 8.1 percent to 7.7 percent.

“The $1.1bn issuance attracted strong investor demand, with a peak order book around.3.2 times over-subscribed, allowing for around 40 basis points of tightening from initial price thoughts to a re-offer yield and coupon of 7.7 percent,” the Government said.

“The transaction also benefited from a two-day roadshow, during which the Government engaged with more than 95 investor accounts across North and Latin America, Europe, the Middle East and Asia-Pacific.”

The Government added that the new debt capital raise is expected to allow it to reduce principal payments due on its existing bonds by $331m during the three years to 2029. This is because the new $1.1bn issue is designed to replace, and refinance, at least two existing bonds by pushing repayment out by a further 10-11 years.

These existing bonds, one with a 6 percent interest coupon, and the other with 9 percent that was placed at the height of the COVID-19 pandemic, were due to mature in 2028 and 2029 respectively. Some $158.181m and $173.135m in outstanding principal is owed on them respectively, totals the $331m referenced in the Government release.

Their full replacement and refinancing, though, depends on how many existing investors agree to swap their current bonds for the new $1.1bn issue and that offering does not close until Tuesday with settlement due next Thursday. The Government is also seeking to refinance three other existing bonds via the new issue, making for a total of $813m that is in its sights.

The Government described the benefits as “proactive reduction of refinancing risk through the expected make-whole redemption of the 2028 and June 2029 Eurobond series, reducing scheduled principal repayments by at least $331m through the end of 2029, with further reductions depending on final repurchase levels for the November 2029 series”.

It added that the $1.1bn raise will also permit “refinancing of legacy indebtedness and short-term facilities in strategic sectors, supporting the proactive management of The Bahamas’ public sector debt profile”,

The Government said it will also lead to “an extension of the average maturity of public sector debt through the refinancing of the two shortest-dated international bonds, which have a weighted average residual life of 1.9 years, alongside other short-term bank credit lines”.

And, finally, the external bond raise will consolidate “smaller Eurobond series into larger, more liquid benchmarks, enhancing secondary-market liquidity and supporting the continued repricing of The Bahamas’ international yield curve”.

The Government added: “The transaction achieved a yield reduction of more than 50 basis points compared with The Bahamas’ June 2025 issuance [at 8.25 percent], despite a longer tenor, equivalent to a spread contraction of approximately 150 basis points for a comparable maturity. This favourable repricing reflects the strengthening of The Bahamas’ credit profile.”

However, the release was quiet on whether the new bond financing will reduce debt servicing or interest costs for Bahamian taxpayers as four of the five issues being replaced, or repurchased, all carry lower coupons.

One source questioned whether this will result in an increase in the net present value of The Bahamas’ debt if the interest costs are higher, which would mean it should go before Parliament for approval.

“Most of the bonds that were refinanced were between 6 percent and 7.1 percent. This may cause us to pay out more in interest than before,” they said.

“The key question that must be answered by the Government is whether or not this transaction increases the net present value of our outstanding debt and whether it increases the annual debt servicing bill. If it does increase the net present value then that requires a Parliamentary resolution.”

Tribune Business contacts last night said the 7.7 percent interest rate represented the highest difference, or spread, between the rate on US Treasuries of all Caribbean bonds issued this year. They said The Bahamas’ spread is about 290 basis points, while those for Trinidad and Jamaica were 227 basis points and 145 basis points, respectively.

However, the Government said: “The Commonwealth of The Bahamas has successfully completed the issuance of a 13-year, $1.1bn international bond and associated liability management exercise including the refinancing of outstanding Eurobond series and certain government and energy sector bank facilities.

“The new issuance and associated liability management exercise represent a significant step in advancing the Government’s debt management objectives.” Some $332m of the $1.1bn proceeds are being used to refinance debt liabilities related Grand Bahama Power Company.