|Wall Street: Sale of CWC’s 2% ‘probable’|
Guardian Business Editor
Published: Aug 03, 2012
The Bahamian government has been "responsive" in the ongoing dialogue with Moody's over the proposed majority takeover of Bahamas Telecommunications Company (BTC).
Edward Al-Hussainy, assistant vice president and analyst at Moody's, said Wall Street and the government have established contact going forward. Meanwhile, a "parallel conversation" with parent company of BTC, Cable and Wireless Communications (CWC), is also on the rating agency’s radar going forward.
The disclosure appears to be an improvement in relations between the Progressive Liberal Party (PLP) and Moody's. Earlier this week, Prime Minister Perry Christie called the probe by Wall Street "unfair", and insisted that his government had not been contacted.
Michael Halkitis, the state minister of finance, confirmed to Guardian Business yesterday that a conference call is now scheduled between government and the rating agency next week.
"The government has been responsive," said Al-Hussainy from New York.
"We have an ongoing conversation with them starting this week. We try and reach out on a regular basis to stay on top of developments, both with the Central Bank and the Ministry of Finance. Obviously with the new government, there is a transition period. But we haven't lost contact with them. I reached out, they got back to me, and we're talking about it."
The top analyst confirmed that the rating agency has also been in talks with the CEO of CWC, Tony Rice.
Calling the sale of two percent to the government a possible "probable scenario", Al-Hussainy elaborated that CWC has no intention of losing its investment in The Bahamas. While the government cannot force them to sell, the parent company of BTC is in no position to walk away.
Giving up a two percent stake, and retaining managerial control, has emerged as a probable scenario as talks are set to begin later this month. Thursday’s report noted that this scenario would indeed be a “credit negative” for CWC.
"Right now, their sense is it's early and negotiations haven't begun yet, so we're waiting to see. Their preference is to stay in a majority shareholder position. The Bahamas is important to their bottom line. They have a lot of eyeballs on what is happening right now," according to Al- Hussainy.
On Thursday, Moody's released a damning assessment of the government's campaign to gain majority control of BTC. It assigned a double credit negative to the upcoming talks, both for the country and CWC, should a majority takeover come to pass.
Stepping back for a moment, the co-author of the report clarified that the credit negative does not mean another downgrade would come to pass if the government's initiative proved successful.
Rather, he said the move is a signal of uncertainty for investors as it relates to the policy environment.
"The broader issue here is that Moody's has a negative outlook for the sovereign credit rating that is driven by weak growth and elevated levels of debt," he told Guardian Business. "This BTC story so far is credit negative, but it does not imply that the sovereign credit rating is at imminent risk. I think The Bahamas remains a relatively strong credit in the Caribbean context."
The re-nationalization process, he added, is part of a greater equation for measuring the country's future prospects.
In Thursday's report, Moody's commented that the government's recent actions are "erratic" and signal an about-face in policy. Clarifying the position to Guardian Business, Al-Hussainy noted that it is too early to tell the exact consequences of the process.
"The point I tried to make in the piece is the uncertainty created by the process," he explained. "The fact this conversation is happening is creating unease. That is where we are right now. I'm hoping as it develops, we'll get a better sense of what the goals are ultimately."
Of particular concern to Moody's, he emphasized, is the expected privation and introduction of competition to the telecommunications market by 2014. He said it is a "major development" that has come to be expected in the sector.