October 24, 2020
Deputy Prime Minister and Minister of Finance the Hon. K. Peter Turnquest stated that one of the Government’s financing goals this year was to approach the international capital markets for the bulk of its foreign currency funding.
“It should be noted that it is customary to seek critical mass in terms of large financing requirements with a capital market transaction, given that the size of our financing requirement is not typically what commercial banks or International Financial Institutions (IFIs) are willing or able to meet directly,” DPM Turnquest explained in his statement on the Government’s Borrowing Activities for the Fiscal Year 2020/2021 (July 1 – Mid October 2020) in the House of Assembly, Wednesday, October 21, 2020.
He added that the Government has always maintained the imperative of maintaining access to overseas credit markets—both now and in the future.
“While we have and continue to leverage domestic markets, there is a limit to what we can obtain, as the existing holders have limits on what they are willing and able to hold.”
The DPM stated that in the prevailing environment, with minimal foreign exchange earnings, the pool of available investment funds is much thinner. “Indeed, what we have been observing is that there is an increased demand for cash to meet the emerging needs brought on by COVID-19.”
He noted that all factors being considered, in late August, Credit Suisse and RBC Capital Markets, LLC, were engaged to examine market conditions for the issuance of a possible index sized bond, that is, at least $500 million, which would allow the Government to access more efficient pricing in the international capital markets.
DPM Turnquest said momentum for the capital transaction was built with the help of a virtual investor road show conducted on October 5 and 6, “at which time our team, which comprised myself, the Acting Financial Secretary and the Director General of Tourism, met with over 45 global investors.”
He said the goal was to present investors with an update on economic and financial trends in The Bahamas, as well as the Government’s recent policy initiatives for combating the COVID-19 pandemic and plans for reopening of the tourism sector.
The DPM said the Government also prepared an Offering Memorandum document, to help position The Bahamas to be able to take advantage of market opportunities as they presented themselves. “I can assure the public; investors were properly appraised of the Government’s fiscal and economic outlook and plans.”
He explained that on Wednesday October 7, a benchmark issue of $US$600 million was opened to markets and the Government was able to take advantage of a positive market window on October 8, to price a US$600 million issue of bonds.
“At a weighted average life of 11-years, the bond was priced at an interest rate of 8.950 per cent, payable semi-annually in arrears. Principal payments are to be made in three equal annual instalments, commencing on October 15, 2030 and a final maturity date of October 15, 2032.
“The net proceeds of this US$600 million issue will be used to finance the Government general budgetary requirements and to repay the US$248 million Bridge Facility.”
By Llonella Gilbert