business@tribunemedia.net
TUESDAY, MAY 5, 2020
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CHRISTINE WHITFIELD
Realtors: ‘No brainer’ over sector restart By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net RE-OPENING the real estate sector to allow property viewings should be “a no brainer” given its economic importance, the Bahamas Real Estate Association’s (BREA) president argued yesterday. Christine Wallace-Whitfield said she and other BREA directors were pushing hard to persuade the government to treat it as an “essential service” that should be allowed to re-open given that its business did not involve multiple interactions with different parties. Pointing out that the sector was inextricably linked to construction and foreign direct investment (FDI), an area that could bring in much-needed foreign currency amid the continued tourism shutdown, Mrs Wallace-Whitfield said it also played a key role in a domestic economy that the government is cautiously moving to restart following the COVID-19 pandemic. She added that both residential and commercial tenants, some no longer able to afford their rent amid business closures and job and income losses, were desperately keen to move but unable to do so due to the real estate industry’s lockdown and wider economic restrictions. And inquiries from potential buyers are still coming in, the BREA chief added. “We have written to the prime minister sending in a very, very detailed letter,” Mrs Wallace-Whitfield told this newspaper. “We did our research on different international markets and we thought-out our points. “We basically wrote to him saying how real estate should be essential, and essential from the get-go. There are a lot of people in rental accommodation that need to make a move as they cannot afford the rent they are paying, so they need a chance to move. “With commercial rentals people are closing or need to find somewhere cheaper. And there seems to be an ongoing flow of interest in
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Bahamas downgrade hits cruise port costs By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
T
HE Bahamas’ sovereign credit downgrade has increased the Nassau Cruise Port’s financing costs to a level “never” considered just 90 days ago, its top executive has revealed. Michael Maura, the cruise port operator/developer’s chief executive, told Tribune Business he and the company’s financial advisers had never believed they would have to price its just-launched $130m bond issue with an eight percent interest coupon until the COVID-19 pandemic struck. Anthony Ferguson, president of CFAL, which is the lead placement agent for the bond issue, explained that Standard & Poor’s (S&P) decision to further downgrade The Bahamas’ sovereign debt below “investment grade” status coupled with Moody’s move to put this nation “under review” to follow suit had immediately sent the price of the government’s US dollar debt soaring in
• $130m bond issue forced to 8% coupon • Price ‘never considered 90 days before’ • $400m boost if match Caribbean leader
NASSAU Cruise Port. secondary markets. He said the interest rate attached to this debt had “gone extremely high right after the downgrade”, jumping from the five to six percent range to eight percent, to reflect the increased risk associated with investing in Bahamian sovereign debt. Given that the government’s debt typically acts as the benchmark against which all other Bahamian debt capital raises in international markets are priced, Mr Ferguson explained that the Nassau Cruise Port had no choice but to increase the interest coupon attached
to its bond to eight percent - especially since $50m will be in US dollars raised from overseas investors. “Ninety days ago I never thought we’d be at eight percent. I never would have contemplated eight percent,” Mr Maura told this newspaper, adding that other Bahamas-based entities that have obtained or are seeking international financing - such as the Nassau Airport Development Company (NAD) - will also likely experience similar pricing/cost pressure as a result of the sovereign downgrade. “If you look at Bahamian
Prime [we’re priced] 375 basis points above,” Mr Ferguson added. “It’s a significant margin, a fair margin, and we did not want the US rate to be different from the Bahamian dollar rate as happened with NAD. Everyone will have the same risk dollar in it and will be compensated the same.” The Nassau Cruise Port’s financing costs associated with Prince George Wharf’s $284m transformation, including upfront fees and interest expenses during construction, are now projected to be $34.3m. A passenger facility charge (PFC) levied on all users of the cruise port will finance repayment of the $130m bond and an additional $80m worth of debt to be raised in 2021. The levy, which was $4 per head in 2019, is being increased to $5.50 this year and then to $8.50 per person in 2021. From 2022 onwards, all
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Restrictions give $300m foreign reserves ‘buffer’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Central Bank’s governor yesterday said measures imposed to restrict foreign currency outflows will create $300m in “buffers” to safeguard the external reserves and the fixed US dollar peg. John Rolle revealed that the regulator has suspended all approvals for Bahamians seeking to invest in foreign securities and real estate, and requested that the National Insurance Board (NIB) liquidate “some” of its overseas investments and return the proceeds back home, as part of a package intended to protect the country’s monetary foundation from the COVID-19 fall-out. Signalling the Central Bank’s determination to maintain The Bahamas’ one:one fixed exchange rate with the US dollar, Mr Rolle said these two initiatives
• No overseas real estate/securities investments • NIB asked to liquidate ‘some’ US dollar assets • Central Bank to protect currency peg as priority
JOHN ROLLE will join the bar on Canadian-owned bank dividend remittances and relaxation on bank foreign exchange sales to the public in helping the foreign reserves to withstand the immense pressure imposed by the absence of tourism inflows. And he warned that the regulator was prepared to act swiftly in imposing even
harsher restrictions if the need arises, which would “target domestic import capacity” in a bid to conserve foreign currency resources that are set to experience a major reduction in 2020. While the suspension of economic activity for the past six weeks due to the national lockdown has kept the country’s foreign reserves at near-$2bn for the moment, Mr Rolle said the Central Bank is projecting a reduction “potentially exceeding $1bn” which would leave them somewhere between $800m and $1bn at year-end. And, although this level will still offer “adequate support in place to uphold the value of the Bahamian dollar fixed exchange rate”,
the governor said it was essential for The Bahamas to “maintain currency stability in the interim” - and prevent any possibility of a devaluation - while the economy attempted to recover from the COVID19 pandemic. “I would say that collectively, between the various measures that the Central Bank has identified, we’re looking at in excess of $300m in buffers,” Mr Rolle replied, when asked by Tribune Business how much the restrictions will save in foreign currency outflows. Addressing the Central Bank’s quarterly economic developments press conference, he added: “One should appreciate that we’re
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Return to business sends firms ‘ecstatic’ By YOURI KEMP and NEIL HARTNELL Tribune Business Reporters BAHAMIAN firms able to offer delivery and curbside pick-up were yesterday “ecstatic” about resuming commerce after a six to seven-week shutdown during which many earned zero income. Brent Burrows, general manager of CBS Bahamas (Commonwealth Building Supplies), told Tribune Business that the Prime Minister’s decision to move to Phase 1B of his COVID19 economic re-opening strategy meant the retailer can offer products and services five days per week via its e-commerce platform. “We’re ecstatic about that for our e-commerce platform that we have been trying to get approval for, and we’re ecstatic that we can deliver e-commerce and online shopping now five days a week now,” Mr Burrows said. CBS Bahamas, as a home and hardware retailer, is also permitted to open in-store for two days per week on Wednesdays and Fridays. Mr Burrows added: “Demand on Wednesdays and Fridays when we are open is extremely high. Our website is doing quite well, so it is still busy. I don’t know how long it’s going to last but at least we are getting some money in the till. “The website has been up and functional for three weeks now. Bear in mind we were only able to deliver on Wednesday and Friday’s up until Sunday evening, so it has been going well. We have partnered with a local company to do delivery, and we have been doing delivery ourselves, so it is going quite well.” Multiple companies able to take orders over the internet or phone, and fulfill them either by delivery or pick-up where there is minimal interaction with consumers, were yesterday able to earn their first revenues in just over a month-and-a-half following the mid-March COVID-19 lockdown. They were also able to recall numerous employees to work, thus giving those staff the first opportunity to earn in some six to seven weeks. Jeffrey Beckles, the Bahamas Chamber of
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Economy may contract by ‘mid to upper teens’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamian economy may shrink by between 15-19 percent this year with a fully recovery of COVID19 losses not occurring until 2022, the Central Bank’s governor warned yesterday. John Rolle, in a bleak near-term assessment of the country’s post-pandemic prospects, said the Central Bank’s initial projection of an eight percent contraction in Bahamian economic output (gross domestic product or GDP) for 2020 was now “outdated”. And he warned that the Bahamas faced “excessively greater hardship” from COVID-19 in the short term than during the 2008-2009 recession, although he forecast that the recovery period will be much shorter than the decade it has taken the economy to rebound from
• Governor: Full recovery not until 2022 • Initial 8% GDP shrink forecast ‘outdated’ • Near-term ‘hardship greater’ than 08-09 the latter. “In our early work, when a lot of the analysis centred on the economy being in stasis for about three months, tourism being in stasis for three months, we would have arrived at an eight percent estimate,” Mr Rolle said for the size of 2020’s economic contraction. “If one relaxes that assumption we could get a contraction that could be in the mid to upper teens... We know eight percent is an outdated estimate.” The “mid to upper teens” projection would be in line with Standard & Poor’s (S&P) recent projection that The Bahamas will suffer a 16 percent, or nearly $2bn, contraction in GDP during 2020
due to the tourism shutdown and associated economic lockdown. The Central Bank’s earlier forecast would have been in line with the shrinkage projected by both the International Monetary Fund (IMF) and Moody’s, but Mr Rolle argued yesterday that it was “not useful” to get hung up on numbers and projections. Instead, he argued that the primary concern was “how that magnitude of shock affects the net inflows of foreign exchange”. Explaining the Central Bank’s projection that the Bahamian economy will take two years to fully recover from the pandemic, the Central Bank governor
added: “2022 is a point at which we think, if the recovery begins at a very gingerly pace in the near term, given all the public health and safety concerns and the prospects of a vaccine for COVID-19, it will take is until 2022 to be fully recovered. “It is not to say the recovery will not begin until that period. It is the mere fact that the economy will have had such large losses in 2020 that we expect in 2021, while the level of economic activity will be collectively higher than at present, it will not be at the level that erases all the losses that we are likely to incur this year.”
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