Cable’s $ 70 million loan remedies “breaches” of Aliv’s terms of obligation

By NEIL HARTNELL

Editor-in-chief of the Tribune

[email protected]

Cable Bahamas’ long-term loan of $ 70 million to its subsidiary Aliv reportedly remedied yesterday the failure by the mobile operator to comply with the conditions attached to the $ 60 million in bonds previously issued.

Franklyn Butler, managing director of the BISX-listed communications provider, told Tribune Business that the introduction of “more patient capital” by Aliv’s parent company helped remedy violations previously identified in financial statements. for the year until the end of June 2020.

The completion of the $ 70 million loan transaction enabled Cable Bahamas to reclassify the debt of over $ 58 million owed by Aliv to bondholders from a so-called “current” liability to a non-current liability , as evidenced by its balance sheet at the end of December. 2020.

“This is Aliv’s funding being consolidated,” said Butler. “From Aliv’s perspective, they are now in control of their network because there is no vendor funding, and they have now completed their full funding based on the original plan they had. Aliv had always considered taking on bank debt.

“From Cable Bahamas’ perspective, we have security over Aliv’s assets and we believe we have sufficient funding in place for Aliv’s preferred shareholders and bondholders to be fully secured. We see it as an investment that will help drive growth and EBITDA (earnings before interest, taxes, depreciation and amortization).

“We are working with RF Holdings, as a bond trustee, on breaches of the covenants and since we did not have long term funding in place it was essential to put the $ 70 million in and support them. to make sure that we are not in violation of any of the clauses of the link.

Cable Bahamas’ financial statements for the year ended June 2020 revealed a breach of terms and conditions attached to unsecured Series A and B bonds issued in March 2017 to help provide capital to finance expansion of the Aliv network.

“The proceeds from the notes have been used for various investment 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 must be paid through a payment agent.

“During the year, and at June 30, 2020, the group was not in compliance with the financial covenants of the notes as defined in the trust agreement. As a result, the notes have been reclassified this year to current liabilities in the consolidated statement of financial position.

“After the end of the year, the violation was not resolved, and although no waivers were received, the notes were not called by the trustee.” There was no indication at the time that Cable Bahamas / Aliv had not paid interest and principal to date, as more than $ 5 million in interest was paid to bondholders in the 12 months. ending end of June 2020.

With the $ 70 million funding solving this problem, Cable Bahamas also said it was following the lead set by other BISX-listed companies after its board of directors this week approved a voluntary repurchase of its common stock. .

Although no buy and price targets have been set, Mr Butler confirmed that Cable Bahamas’ aim is to safeguard its stock price and prevent it from being devalued by small retail investors who decide to accept any price to get out of their investments.

“We will be like everyone else in the market where we believe we can support the share price instead of allowing small trades to drive the share price down,” he told Tribune Business. “We think we have a very orderly process where we start to pay back some of the principal on the balance sheet.

“We are convinced that we are on the right track. We believe we need to support the share price throughout this orderly process of restructuring the balance sheet and returning dividends to shareholders. “

Mr Butler conceded that Cable Bahamas shareholders are “worried” that the company will return to profitability and that dividend payments will resume thereafter, but urged them to take “a long-term view” of the outlook for the company. society.

Without providing a timeline, he told the newspaper that the company is likely to achieve profitability “in the not too distant future,” while acknowledging that the capital-intensive nature of Cable Bahamas’ business meant that depreciation-related accounting treatments could. be “expensive” on the results.

Cable Bahamas continued to use the proceeds of more than $ 301 million from the sale of Summit Broadband to deleverage and restructure its balance sheet, after reducing its long-term bank debt to $ 10 million and starting to buy back its preferred shares. .

The $ 37 million prepayment in U.S. dollar-denominated preferred shares reduced the principal overdue from over $ 301 million to $ 264 million at the end of 2020, while retaining over $ 94 million in cash and equivalents in its balance sheet.

Cable Bahamas’s income statement also shows progress, with the company generating operating income of $ 4.237 million for the six months to the end of 2020, compared to a loss of $ 2.124 million the last year. However, the combined depreciation with bank interest and preferred stock dividends resulted in the communications provider having a semi-annual net loss of $ 11.784 million – a reduction of more than 50% from the previous year.

Mr. Butler added, “The Cable Bahamas group of companies have succeeded in exceeding their targets in the face of unprecedented adversity. As a group, we were able to come up with a plan aligned with our vision of what agility should be like in this new reality. We are convinced that this has made all the difference in dealing with the implications of the pandemic. “


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