Government secures US$185M financing

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The Cayman Islands government has
selected a successful bidder for US$185 million in long-term financing needed
to support public projects and government operations over the next year.

The bid winner, Cohen and Company
Securities LLC – headquartered in New York – is in the process of finalising
its proposal, according to a statement released by Premier McKeeva Bush on
Monday morning.

“The terms of the long-term
financing are still being finalised as this depends on actual market rates of
the day,” Mr. Bush’s statement read. “However, the proposal that was accepted
was extremely competitive.”

Mr. Bush said bridge financing
ahead of the bond arrangement process had already been secured.

“The solution from Cohen and
Company enables the government to benefit from the current very low interest
rate environment while limiting our maximum interest rate over the entire life
(of the loan),” Mr. Bush said.

Lower interest rates are preferable
because they require government to pay back less money over time on the amount
it has borrowed.

However, opposition party lawmakers
were already expressing concern about how the bid process for this borrowing
had been handled by the ruling government.

George Town MLA Alden McLaughlin
said Monday that he understood the initial bid winner for the US$185 million in
financing selected by Cayman’s Central Tenders Committee was not chosen by
Cabinet.

Mr. McLaughlin said the committee
had initially recommended the bid be awarded to a joint venture submitted by
two locally operating banks.

“I would like to express my grave
concern that the Central Tenders Committee process wasn’t followed,” Mr.
McLaughlin said.

The Caymanian Compass contacted
officials with the tenders committee for comment on the matter. They confirmed
that the initial bid winner selected by the committee was not the bid
government ended up choosing.

Mr. Bush’s statement said the Cohen
and Company bid was “the lowest rate among all of the fixed-interest rate
solutions presented to the government from firms who could deliver the funding
to the government on time”.

“Last year, we secured financing at
a rate of 5.95 per cent,” Mr. Bush said. “This year, due to the low interest
rate climate owing to the depressed global economy…we were able to secure a
much lower cost of funding,” the premier continued. “This was also due to the
highly competitive nature and innovative solution offered by Cohen and
Company.”

Cohen and Company is publicly
traded on the New York Stock Exchange and manages approximately US$10.6 billion
in fixed-income assets in a variety of classes.

Senior Managing Director Stuart
Sugarman said Cohen and Company was pleased to provide the necessary financing
package to the Cayman Islands government.

According to details of the
borrowing plan released by Premier McKeeva Bush’s office at the beginning of
this fiscal year, more than half of the sum of – which equates to CI$155
million – will go toward work on the two new public high schools on Grand
Cayman, as well as the completion of the new government office accommodation
project.

About CI$53.8 million of the
borrowing has been earmarked for the new John Gray and Clifton Hunter high
school campuses, as well as work on some primary schools.

Another CI$30 million has been set
aside for the completion of the government office building on Elgin Avenue in
George Town. 

The completion of the new
administration building is expected to save the Cayman Islands between CI$8
million and CI$10 million per year in lease payments the government now makes
on the various offices it is renting in Grand Cayman.

Some CI$29.4 million will go to
meet the day-to-day operational needs of government, such as funding the
operating deficit and other obligations. According to projections released at
the beginning of this year, Cayman is expected to end the 2010/11 fiscal year
with something close to a CI$32 million deficit, which means its revenues are
again expected to fall short of what it is spending.

About CI$18.5 million has been
earmarked to support the operations or assist with purchases for a number of
statutory authorities and government-owned companies. Those include CI$5.1
million for Cayman Airways, CI$1.8 million for the Health Services Authority,
CI$9.7 million for the Cayman Turtle Farm and CI$1.9 million for the National
Housing and Development Trust.

Some CI$16.1 million will be
borrowed, mainly for purchasing expenses, for the Portfolio of Internal and
External Affairs, judicial administration, legal affairs, Ministry of Health,
Ministry of Community Affairs, the Ministry of District Administration and the
Ministry of Finance.

The remaining CI$7.2 million will
be borrowed for a number of public works projects, including: a secured remand
facility for juveniles who are criminal suspects, an emergency shelter for Cayman
Brac, as well as payment for Brac land acquired for roads and the bluff play
field, and various road construction projects around the Cayman Islands.

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Mr. Bush