In a release issued Thursday, Kerzner International said that of the 10 million Bahamian Depository Receipt representing one million ordinary Kerzner shares only 4.28 million BDRs were purchased. The release continued that the $19.1 million raised in the offering would be used by the company to fund capital expenditures including the current Phase III expansion.
In an interview with The Guardian immediately following the release of the level of subscribers to the offer, Michael Anderson, CEO of Fidelity Capital Markets, lead placements agents for the offering, said that while they had no idea how the offer would be received by local investors, they were aware that $43 million was “an extremely tall offering” for the local capital market.
The Fidelity executive continued that overall the placement agents were very happy with the manner in which the offering was received and were even happier to be involved with such a land mark offering. “The security itself has a number of features to it that from the Bahamas capital market point of view is a significant step forward,” Mr. Anderson said.
According to the CEO of Fidelity, the Kerzner BDRs would be the first security traded on BISX that would not be impacted by local demand, as the bulk of the demand for the security would come from international sources. He continued that because the stocks opening price would always be the closing price of KZL on the New York Stock Exchange the previous day, local investment managers holding this stock in their portfolio would not have to deal with the worry that a small volume of shares could substantially change the underlying price.
Commenting on the fiasco immediately before the offering opened to the public that saw the government excluding the classes of investors the principals of the offering had initially hoped to include, Mr. Anderson said despite this, the offering itself was still a milestone for the country.
Expanding on why he was supportive of extending this offering to temporary residents, permanent residents with a restricted right to work and companies designated resident for exchange control purposes with a degree of non Bahamian ownership, Mr. Anderson said that it has never made sense to exclude this class of investors from participating in the local capital market.
“It has never made sense to the market participants that we exclude certain people, resident to The Bahamas who wish to invest in The Bahamas – whether that’s companies like Imperial or British American Insurance,” he said adding that collectively these two companies have been doing business in The Bahamas for over 180 years.
Further explaining the unique catch 22 that this class of investors find themselves in, the Fidelity CEO said that in the case of the insurance companies, they raised Bahamian dollar premiums and the level of returns they can provide to their investors was limited by their ability to invest. He added that for the foreigners living in the country it was also unfair to prevent them from subscribing when they might have lived in the country for decades and earn their money from activities within the country.
“We believe the capital from those two groups could be a significant boost to the local capital market if it’s mobilized,” Mr. Anderson said. “Here was an attempt on our part to allow them to participate in an offering as a first step towards that and as future offering progressed, they would be deemed to be eligible investors as apposed to this stage ineligible.”
Addressing questions on how he felt the less than 50 per cent interest in the security would be perceived by international observers, Mr. Anderson expressed doubt that that such an insignificant level of shares would appear on anyone’s radar.
“It’s a relatively minor issue,” he said. “If you think in a day – like yesterday – over 600,000 shares of Kerzner were traded on the New York Stock Exchange and the total amount shares that was offered here was 28,000, in relative sense compared to the number of shares that traded, its not really significant.”
The CEO of the lead placement agents of the Kerzner offering noted that although there was a strong level of subscription from the general public, the bulk of the offering was taken up by institutional investors. He also definitively stated that because the government did not come to a decision on whether to allow the National Insurance Board to participate in the offering before the July 2 closing date, they were never allocated any shares.
By MARTELLA MATTHEWS,Guardian Business Reporter
