By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister’s Office yesterday confirmed that the Government elected not to “pursue” up to $1bn in financing offered by a UK government agency that included $200m for Grand Bahama’s airport.

No explanation was given for why the Davis administration decided not to proceed with the 2023 package offered by UK Export Finance, although Tribune Business reported at the time that the British government’s export credit arm wanted The Bahamas to provide a sovereign guarantee to underwrite repayment of the funding.

It was understood that the Government was reluctant to provide such a guarantee, or letter of comfort to reassure that any debt would be paid, because doing so would mean the funding showing up on its balance sheet and further adding to the already-$11bn national debt.

The Prime Minister’s Office, in a statement, described the UK Export Finance funding and negotiations around it as “exploratory”. It said: “The bank [UK Export-Finance] indicated that $1bn was available, but any drawdown would depend on projects meeting their internal requirements and demonstrating benefit for The Bahamas.

“The Government did not ultimately pursue this as a financing measure for the Grand Bahama airport.” However, one financial source, speaking on condition of anonymity, told Tribune Business that the Prime Minister’s Office’s statement raised more questions than it answered.

“What ‘internal requirements’ could the Government not meet? What specific conditions was the Government not prepared to meet? Accountability? Transparency? Procurement?” they asked. “All that is a cute way of saying that they [UK Export Finance] wanted a sovereign guarantee and the Government was not prepared to give it. It still begs the question: Who will give the money without a sovereign guarantee?”

Tribune Business records from the time include an interview with Anthony Myers, Bahamas Hot Mix’s (BHM) chairman, and a lead investor in Aerodrome Ltd, the Bahamian group in the winning Grand Bahama International Airport bid consortium, and Jesse McDougall, UK Export Finance’s head for the North American and Caribbean region.

They confirmed that the size of the potential financing drawdown and its uses were still being worked out with the Davis administration, with the Prime Minister at the time signalling that a portion of the funding may be used for the overhaul of 14 Family Island airports.

Philip Davis KC, responding to questions at a Caribbean Council meeting in London ahead of King Charles’ coronation, gave the impression that $400m of the UK Export Finance package would be devoted entirely to Grand Bahama International Airport’s redevelopment.

This seemed to imply that the price tag had doubled from the original $200m, with the investment set to match that of Lynden Pindling International Airport (LPIA) in Nassau, and raised questions over why the Government - and not the Grand Bahama International Airport consortium - was seemingly raising the financing for the project.

Mr Davis later clarified that Grand Bahama International Airport’s price tag remains at $200m as previously announced, with the remaining $200m potentially targeted at 14 Family Island airports - such as North Eleuthera and Exuma - whose redevelopment has been estimated at $263m.

This was subsequently confirmed by Mr Myers, who was among the group accompanying the Prime Minister on his UK visit. “We’re still in negotiations with that in terms of the final sum,” he told Tribune Business of the talks with UK Export Finance.

“The original sum was $270m, and it could be as high as $400m...... It could be higher than that, it could be lower than that. He [Mr Davis] was picking a number he was comfortable with. It will probably be that number. The Government is very much aligned in making this happen and moving forward very quickly.”

Chester Cooper, deputy prime minister, in announcing the Aerodrome Ltd private-public partnership (PPP) deal for Grand Bahama International Airport in mid-March 2023, confirmed UK Export Finance as the financier.

But Mr Davis, in clarifying his statements on the $400m, confirmed that the Government was seeking to structure the potential drawdown from UK Export Finance in such a way as to keep it from adding to the $11bn-plus national debt.

“We’re trying do it in a way that would not immediately increase our debt, and so we’re entering this partnership with the UK Development Bank,” the Prime Minister added. “For all intents and purposes, the bank has indicated to us that they would have $1bn available to us for infrastructural development.

“We have to identify those projects to be able to decide what we would draw down. The fact that it’s available doesn’t mean we will use it all. It has to be a project that they could embrace, and that they feel has what they call an internal rate of return that will benefit the country and its people.”

Ms McDougall explained that UK Export Finance had a Bahamas “country envelope” worth £750m, or $950m, which is the total available financing that can be allocated to infrastructure projects in this nation where there is “UK content” - meaning that British companies are involved.

In the case of Grand Bahama International Airport, Bahamas Hot Mix (BHM) is “the exporter of record” through its UK office. Ms McDougall, though, explained that the total $950m represents “a global allocation” that is not necessarily drawn down quickly, or all at once, by the borrower.

This often occurs over a period of time, “years and years”, before it is used up and, in the case of The Bahamas, it is presently seeking just $400m or less than 50 percent of the total available. UK Export Finance, which serves as the British government’s credit agency, is also selective in what it funds, choosing only “qualifying projects” once due diligence is satisfactorily completed.

More recently, Ryan Pinder KC, the attorney general, suggested that the Government would inject the remaining net $300m proceeds from its recent $1.067bn sovereign bond issue into the National Investment Fund. A portion of that $300m was to go into one of the Fund’s sub-funds, dedicated to airport infrastructure development, and be used to finance Grand Bahama’s airport project.

There has been no confirmation that this has occurred. One source, speaking on condition of anonymity, questioned whether the Government could legally place the $300m straight into the National Investment Fund given that all borrowings - including from bond issues - are required by law to be deposited into the Consolidated Fund.

They added that the Government would likely have to go back to obtain Parliament’s approval to do so, as the constitution stipulates that all government spending must occur with either the authority of statute law or the approval of lawmakers.

And obtaining Parliamentary approval would result in the $300m borrowing showing up on the Government’s balance sheet as an expenditure, which would likely result in the Government missing its $75.5m deficit target for 2025-2026 as this bond offering proceeds were not incorporated into this year’s Budget.