Bullseye

It’s a deal RBTT is still gloating over. RBTT Merchant, with its recent capital market issue of US$104 million, a Senior Secured Note, to Empresa Generadora de Electricidad Haina, SA (EGE Haina), has set in motion a financial ripple. Not only has it firmly entrenched the bank in the Spanish-speaking Caribbean, it has also raised its regional profile. Haina is one of the largest electricity-generating companies in the Dominican Republic(DR). While this is not the largest transaction facilitated by the Merchant Bank, it was a major milestone for them in terms of getting into the lucrative Spanish-speaking Caribbean, a region aggressively being sought by local banks. Acting as trustee, issuing agent, registrar and payment agent for the transaction was JPMorgan Chase Bank, London. Mark Singh, managing director of RBTT Merchant, said this transaction with Haina was long in the making. It  took one year and three months to finalise. The US$104 million was provided to Haina for the acquisition of additional share holding rights in another DR power company, Itabo, to repay a debt to Nordbanken AB (Nordea Loan) and to purchase a badge to increase the company’s power-generating capacity. “We provided them with funds primarily to finance a badge with generators to increase power to the Dominican Republic,” Singh said in an interview. The US$30 million of the Senior Secured Note was used to increase their ownership in Itabo, one of the subsidiaries they were interested in acquiring, Singh noted.

Haina had for a long time, been interested in acquiring full ownership of Itabo, but faced some financial obstacles. The company ended up shelving its plans to buy out Itabo until liquidity improved in the DR financial market. Also, this purchase of Itabo was originally scheduled to take place last year, but was halted when all parties involved could not come to an agreement. Itabo is owned 50% by the government and 50% by US company El Paso and Chilean company AES Gener. The Senior Secured Note for US$104 million was initially supposed to be the first stage of transactions with a syndicated loan and a second senior secured note to follow, bringing the total financial deal to US$250 million. If Haina indeed acquires Itabo, a deal that was supposed to cost Haina US$250 million, it will become the largest power company in the DR with 600MW capacity. This is approximately 50 per cent of the total generation capacity within the Dominican Republic. But, Singh said while the Merchant Bank is geared to have a US$65 million line of credit, to be done in the DR, Haina has halted all transactions until financial conditions improve there. “As of now, this is the only transaction for Haina,” said Singh. The Haina deal has raised the stakes in the local banking sector.  Republic Bank, a local competitor, has already pitched itself as the trade facilitator in Cuba and for local manufacturers to gain a foothold there.

Republic has also recently increased its lending portfolio in the Dominican Republic by extending lines of credit to companies operating there. Investments have been out on hold by  the DR government until negotiations are completed for a loan package with the International Monetary Fund, said a recent newspaper report in DR.  Although this uncertainty did not affect interest rates in the DR, it has restricted liquidity, the paper said. RBTT Merchant looked to a number of local financiers to raise the money for Haina, said Singh. Investors included Clico Investment, Unit Trust Corporation, Ansa Finance and Merchant, InterCommer-cial Bank, RBTT Trust Company and the National Insurance Company of Jamaica. The Senior Secured Note, due in 2010 at an interest rate of 10 per cent, when used to purchase stake in Itabo, will give Haina control of 35 per cent of the power generation capacity in the Dominican Republic. Currently, the power company commands 22 per cent. As a result, the Haina deal is a massive notch in RBTT Merchant’s financial belt. But the bank is already well known in the region for providing funding to governments, said Singh. He added that RBTT Merchant has done bond issues and provided loans to almost every single government within the English-speaking Caribbean. “We have done bond issue for Grenada, St Lucia, Antigua, Dominica, Trinidad and Tobago and St Vincent. We have provided bonds to the government of almost every single island,” said Singh.

The Merchant bank has recently provided funding for power generation companies, also, within the region. Singh said the largest US dollar transaction to date for the Bank was the issue of US$130 million to the Jamaican Public Service Company (JPSCo), the Jamaican equivalent to TTEC. Funding for several other power companies have been done in St Lucia and Curacao. Other than power, the bank has done some telecommunication financing for the cellular company in Jamaica, Digicell. So we have a long list,” said Singh. Ordinarily, when a company is looking to borrow a large amount of money, they usually talk with several banks that they have a close relationship with and those with a reputation to deliver. The Haina transaction was no different, said Singh.  Along with RBTT Merchant, Haina also had discussions with Citibank, Miami and ScotiaBank, Canada. They also held talks with their domestic bankers. Singh is of the view that  RBTT Merchant was the only local financial institution capable of handling this type of transaction. He said the Bank has built a sound reputation over the last few years and is well known in the region as trustworthy financiers. Singh feels local banks don’t have the capacity to venture into the realm of big financing regionally. He was asked about international banks trying to get into the Caribbean. “In the Caribbean region, there is a little bit of uncertainty by these large banks to get involved in these types of transactions.  “They don’t know the region well enough so we have to step in and help out.” The Merchant Bank is now working on a TT$1.4 billion deal with the TT government:  TT$740m will be raised by RBTT Merchant to assist the Government with Caroni 1975 Ltd, and TT$500m will be raised for the refinancing of government obligations.