By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Aliv’s “far over-subscribed” $120m preference share issue beat its target by 33 percent and “bodes well” for future capital raises coming to market, an investment banker asserted yesterday.

Michael Anderson, president of RF Bank & Trust, which acted as adviser and placement agent to the mobile operator’s recently-closed private offering, told Tribune Business he had been surprised by the amount of investor demand which allowed them to expand the raise beyond the initial $90m target.

“We raised $120m. We were far over-subscribed,” he confirmed. “We had a number of existing preference shareholders who increased the amount of their investment and above what they rolled.” Aliv had been seeking to rollover, or redeem, around $56m in existing preference shares will also seeking to raise an additional $34m from investors purchasing new securities.

“People that already had shares were given the chance to buy that $34m,” Mr Anderson explained. “That $34m easily got subscribed by the different investors, and we then had a really large investor come in. We went back to Aliv and asked for approval to accept $30m more than the original $90m.

“We got approved to accept $30m more and, at the end of the day, the full $120m was raised. We had these guys come in and ask for more. We asked how much more we could place and, based on the enthusiasm we saw in the market, we thought we could increase it by $30m. Aliv agreed to extend the offering by $30m and the full amount was taken up.”

Mr Anderson, revealing that investor appetite surprised even RF Bank & Trust, told this newspaper: “We already thought there would be good support for the $90m. We didn’t realise there would be enough support to do the $120m. Aliv was very happy with the uptake, and the confidence the public has in it now that the company is cash flow positive.”

Franklyn Butler, chief executive and president of BISX-listed Cable Bahamas, which owns 48.25 percent of Aliv and has Board and management control, was travelling yesterday and could not be reached for comment before press time.

However, he told Tribune Business earlier this month that the capital raise which closed last Tuesday, October 15, “takes us where we need to be” by “cleaning up” multiple inter-company loans and providing funds for capital investment as well as refinancing a substantial amount of the mobile provider’s existing debt.

Mr Anderson, meanwhile, said the extra $30m will give Aliv greater “flexibility” in terms of how it deploys the capital raised. The mobile provider now has a total $64m, over and above the $56m that refinanced the existing preference shares, that can be employed in areas such as network upgrades and expansion plus the likes of fifth generation (5G) technology.

“They already had plans for how to deploy the $34m, and adding the extra $30m in gives them flexibility in terms of use of the use of funds. They have a chance to decide what to do with it. They have greater flexibility over what to do with it,” he added.

Mr Butler had been hoping that the $120m issue would attract a lower interest coupon, but Mr Anderson said it was recommended to keep the same 8 percent rate as the preference shares that were replaced because investor funds would now be locked in for the full ten-year term prior to maturity.

Explaining that these terms were slightly different to those attached to the replaced issue, he added: “The price of these new shares was clearly attractive to investors. The shares replaced early were amortising share. They were in an amortised state, starting at $70m in principal and dropping to $56m.

“The new shares were issued for the full ten-year period. Because of the additional term, it was recommended to stay at 8 percent. These were ten-year preference shares at the same rate. Investors thought the increased risk of the increased terms was acceptable given the rate they will get paid.

“We were very happy with the reaction and enthusiasm that investors displayed,” Mr Anderson told Tribune Business. “It bodes well for more investments coming to the market. There’s still some level of liquidity in the market and, as we go into next year, it will be able to take up any additional offerings that come to market.

“These offerings come out intermittently. We had known about the Aliv offering for some time. We were expecting it, so I think a number of people were expecting it and waiting for it. There’s not that many offerings and investment opportunities that come out every year.

“People are looking to improve the yields and returns they get on bank deposits. The market is looking for investments to participate in to improve their yields. This was a very timely offering. There was a lot of investor money out there.”

Mr Butler, speaking earlier this month just prior to the Aliv preference share issue launch, said: “I think we’ve done a good job getting Aliv to EBITDA (earnings before interest, taxation, depreciation and amortisation) positive.

“I have every confidence that we’ve reduced the risk to the preference shareholders and bondholders. This [the $90m raise] is just to refinance some of the current debt. We started to repay the initial $70m, and I think we had it down to $56m or some number like that. We are actually just replacing some of the current debt, refinancing and replacing it.”

And he added: “We will be in a strong position. This cleans up all the inter-company loans and puts them in their correct position. We believe this puts us in a great position for the group. We don’t anticipate any additional borrowing at this stage of the game save and apart from some 5G stuff and the unexpected.

“We believe Aliv’s debt-to-EBITDA ratio will improve from hereon and that will give us flexibility even if we have to go back out. It’s a fully mature business. With EBITDA at around $35m-$37m, and a $90m preference share issue, we’re around three times’ debt-to-EBITDA which is great for our industry.

“When we were building Aliv we had to gamble and hope the EBITDA would come. Now we are showing we are producing returns for those investors. That’s why I feel we should be getting less than an 8 percent interest rate on this issue.”