Wall Street has begun a probe into the government's apparent drive to re-nationalize the Bahamas Telecommunications Company (BTC), Guardian Business can reveal.
Edward Al-Hussainy, assistant vice president and analyst at Moody's, confirmed that he has reached out to the Progressive Liberal Party (PLP) in an effort to resolve the million dollar question: How would The Bahamas pay for the re-nationalization of its only mobile services provider?
"That is the biggest question," Al-Hussainy said from New York.
"I have reached out to government, primarily to get a sense, if they are going to take an equity position to raise cash, and perhaps take on additional debt, what their thought process is."
The top analyst is also attempting to discover whether acquiring a majority interest in BTC from parent company Cable and Wireless Communications (CWC) is indeed in the public interest.
"To me it is not clear. As far as I can tell, it (BTC) is quite profitable. It's not in dire financial straights," he added.
The disclosure by Moody's adds a new international dimension to the PLP's continued push for re-nationalization. Prime Minister Perry Christie exclusively revealed to The Nassau Guardian recently that he has hand-picked a delegation to negotiate with CWC executives in August.
Businessman Franklyn Wilson, former Attorney General Sean McWeeney, attorney Rowena Bethel and former BTC CEO Leon Williams make up the Bahamian team.
CWC purchased 51 percent of the company in April 2011 for $204 million under the previous government.
Al-Hussainy told Guardian Business that the re-nationalization campaign is not without precedent in the region. In Belize, the government re-nationalized the carrier, but the deal ended up in litigation over the proposed compensation. In fact, the analyst said the debt burden from this re-nationalization is a contributing factor in the country's recent default.
"Obviously Belize has a very different credit story. But their re-nationalization pushed them over the edge," he revealed. "They are in the process now of restructuring their debt, talking to investors to see if they can extend the maturity and alter the interest rate on one international bond outstanding."
Reserving his final judgment on The Bahamas, and calling his comments "preliminary", Al-Hussainy said Moody's simply wants to ascertain if the move by the PLP "makes sense".
Included in this discussion with the government would be an estimation of the fiscal cost, how much equity the government intends on buying back, and whether the PLP plans to offset their costs through a public share offering.
The government currently controls the other 49 percent of BTC. The prime minister announced he has canceled any share offering in light of the upcoming negotiations with CWC.
BTC and parent company CWC have not issued a statement on the upcoming negotiations. Tony Rice, the CEO of CWC, recently revealed during a conference call with investors, however, that he intends on convincing the prime minister that the foreign company is in the best interest of The Bahamas.
"It's too early to make a final determination," Al-Hussainy added.
The comments from Moody's are the second time in recent months that the ratings agency has expressed concerns over government policy.
Back in May, Moody's released a report on the proposed Mortgage Relief Plan, saying it showed a "lack of commitment" to bringing down the national debt, and represents a "moral hazard" in the housing finance market.
The plan calls for government guarantees to cover five years of interest payments for borrowers in foreclosure, in return for interest rate caps on housing loans and write-offs of interest and fees by banks.
Moody's estimated the plan would cost the government at least $250 million.
According to the prime minister's Budget Communication this year, the projected deficit is $550 million, or 6.5 percent of gross domestic product (GDP).
Government debt is forecast at $4.607 billion, or 54.57 percent of GDP by the end of the upcoming fiscal year.

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