By NEIL HARTNELL
Tribune Business Editor
Cable Bahamas’ $70m long-term loan to its Aliv affiliate was yesterday said to have remedied the mobile operator’s non-compliance with conditions attached to $60m in previously-issued bonds.
Franklyn Butler, the BISX-listed communications provider’s chief executive, told Tribune Business that the introduction of “more patient capital” by Aliv’s parent has addressed the breaches previously identified in financial statements for the year to end-June 2020.
The $70m loan transaction’s completion has allowed Cable Bahamas to reclassify the $58m-plus debt owed by Aliv to bondholders from a so-called “current” liability to one that is non-current, as reflected on its balance sheet at end-December 2020.
“That is the Aliv financing being consolidated,” Mr Butler explained. “From an Aliv perspective they’re now in control of their network because there’s no vendor financing, and they have now completed their full financing based on the original plan they had. Aliv had always contemplated to take on some form of bank debt.
“From Cable Bahamas’ perspective, we have security over the assets of Aliv and we believe we have put in enough financing so that Aliv’s preference shareholders and bond holders are fully secured. We see it as an investment that will help drive growth and EBITDA (earnings before interest, taxation, depreciation and amortisation).
“We working with RF Holdings, as the bond trustee, on the covenant breaches and, as we did not have long-term financing in place that was critical to put the $70m in and support it to make sure we’re not in breach of any of the bond covenants.”
Cable Bahamas’ financial statements for the year to end-June 2020 had disclosed non-compliance with the terms and conditions attached to the unsecured Series A and B bonds issued in March 2017 to help provide capital to fund Aliv’s network expansion.
“The proceeds of the notes were used for various capital projects and to fund working capital requirements,” the financial statements said. “The terms of the notes are governed by a trustee agreement, and all payments associated with the notes are required to be paid through a payment agent.
“During the year, and as at June 30, 2020, the group was not in compliance with the financial covenants of the notes as set out in the trustee agreement. As a result, the notes have been reclassified this year to current liabilities in the consolidated statement of financial position.
“Subsequent to year-end the breach remained unresolved, and while no waiver had been received, the notes have not been called by the trustee.” There was no suggestion at the time that Cable Bahamas/Aliv had defaulted on due interest and principal payments to-date, as more than $5m in interest was paid to the bondholders during the 12 months to end-June 2020.
With the $70m financing having resolved that issue, Cable Bahamas also announced that it has followed the lead established by other BISX-listed companies after its Board this week approved a voluntary buy back of its common shares.
While no purchase and price targets have been set, Mr Butler confirmed that Cable Bahamas’ goal is to back-up its stock price and prevent it becoming devalued by small retail investors who decide to accept any price to exit their investments.
“We’ll be just like everybody else in the market where we believe we can support the share price as opposed to allowing small trades to bring the share price down,” he told Tribune Business. “We believe we have a very orderly process where we are starting to repay some of the capital on the balance sheet.
“We are confident we are on the right track. We believe we should support the share price as move through this orderly process to restructure the balance sheet and restore dividends to shareholders.”
Mr Butler conceded that Cable Bahamas shareholders are “anxious” about the company will return to profitability, and dividend payments subsequently resume, but urged them to take “the long-term view” of the company’s prospects.
While providing no timelines, he told this newspaper that the company will likely attain profitability “in the not too distant future” while acknowledging that the capital-intensive nature of Cable Bahamas’ business meant that depreciation and amortisation-related accounting treatments could be “onerous” on the results.
Cable Bahamas’ has continued to use the $301m-plus proceeds from the Summit Broadband sale to deleverage and restructure its balance sheet, having reduced its long-term bank debt to $10m and started to redeem its preference shares.
The early repayment of $37m in US dollar-denominated preference shares reduced the outstanding principal from more than $301m to $264m by year-end 2020, while still retaining more than $94m in cash and equivalents on its balance sheet.
Cable Bahamas’ income statement also shows progress, with the company generating $4.237m in operating income for the six months to year-end 2020 as opposed to a $2.124m loss in the prior year. However, depreciation combined with bank interest and preference share dividends dragged the communications provider to a half year net loss of $11.784m – a reduction of more than 50 percent on the prior year.
Mr Butler added: “The Cable Bahamas group of companies has managed to outperform targets in the face of unprecedented adversity. As a group we were able to deliver a plan that was aligned with our vision of what agility needs to be in this new reality. We are confident that this made all the difference in navigating the implications of the pandemic.”