The Cayman Islands Government confirmed Friday that bids for US$185 million in financing were not publicly advertised as part of an open tendering process.
However, government officials stated that a number of companies were contacted by the Ministry of Finance in writing to invite them to bid on Cayman’s public financing needs.
“The Central Tenders Committee did not object to the use of ‘selective tendering’,” read a statement from the ministry. “This type of tendering has been used in previous…processes by other ministries and departments.”
Twelve local and overseas firms were contacted; six submitted bids and a seventh missed the deadline for the bid by a few minutes.
“There was genuine competition arising from the selective tendering process in March 2011 – especially since the invitation was made to major and world-renowned financial institutions,” the ministry statement read.
Attempts to contact tenders committee chairman Ronnie Dunn about the new loan proved fruitless by press time.
The eventual bid winner – First Caribbean International Bank (Cayman) Ltd. – was one of the two firms that submitted a joint bid in the first government loan tendering process. The Central Tenders Committee’s selection for obtaining the financing was ignored in late 2010 when the Ministry of Finance decided to go with a New York-based firm in arranging the loans.
Six of the seven firms that submitted bids under the first open tendering process in September 2010 were invited to bid again during the March process.
The New York financier, Cohen & Company Capital Markets LLC, did provide Cayman with US$128.5 million in temporary or “bridge financing” to help get it through the current financial year. Those temporary loans must be paid back this month and will partially be paid from the proceeds of the new loan, officials said.
Opposition party members have repeatedly raised concerns about how Cohen & Company was initially selected to arrange the financing, how much was paid in fees to that firm and how much the government paid in interest during period covered by the temporary loans.
“No disclosure has yet been made about this Cohen arrangement,” said Opposition Leader Alden McLaughlin last week. “There were statements that the deal would save Cayman $24 million. That didn’t transpire.”
The Government was forced to end its previous deal with Cohen after those savings didn’t materialise.
“Key amongst the representations made to Government was that a 4.5 per cent interest rate cap could be obtained, at a certain price, so that the rate of interest that Government would pay on its current year borrowing would never exceed 4.5 per cent.,” Premier McKeeva Bush said in February. “Government has now been advised that the 4.5 per cent interest rate cap cannot be obtained at the price previously represented to Government. The increase in the price of the interest rate cap is of such magnitude that it would wipe out the cost-minimisation advantage that had been agreed.”
The Cohen firm was dropped on 27 January and the new loan bidding process started.
AG review concerns
Mr. McLaughlin said last week that the public needs a fuller explanation of what occurred with the loan tendering process. He said the entire matter so far has been conducted in a way that could “charitably be called unconventional”.
The Opposition party, in addition to accusing Premier Bush of circumventing the Central Tenders Process last year, has also made general allegations about “involvement” of a non-elected executive member of the United Democratic Party in the loan deal.
Premier Bush has said he chose “substance over process” in deciding to go with the Cohen firm because they offered a better deal.
“My government took a very grave, but legal, decision to disagree with a process, which gives a sense of safety,” Mr. Bush said in November. “The matter has revealed to me that the Central Tenders process cannot be a one-size-fits-all methodology for capital works, service contracts and financing.” The entire situation prompted a review by the auditor general’s office concerning the overall government tendering process. However, Mr. McLaughlin said he had concerns about that review.
“It sounds more like it’s simply going to be an examination of how this tendering process works,” Mr. McLaughlin said. “What we want is an actual forensic audit into the specifics of this Cohen arrangement.”
Contacted Friday, the auditor general’s office noted its review of the tendering process would look into the specifics of the bids for government financing.