A review of the Cayman Islands government’s bond obligations over the next several years shows the public sector will owe a substantial amount of ‘balloon’ or ‘bullet’ debt repayments prior to its $261 million payment in the year 2019.
According to records reviewed by the Caymanian Compass, the government has five separate ‘bullet’ loan repayments due between mid-2015 and early 2016 for borrowings from the Cayman Islands Development Bank.
A ‘bullet’ or ‘balloon’ debt payment is one that is owed all at once, rather than over a period of years. The government’s 2009 bond issue is one such example where $261 million is due in November 2019.
The five bullet loans taken out on behalf of the development bank have maturity [due] dates listed as: April 2015 ($20 million), June 2015 (two payments totalling $11.8 million), July 2015 ($5 million) and January 2016 ($5 million). That equates to $41.8 million due between the last quarter of the 2014/15 government budget and the first half of the 2015/16 budget.
The first payment of $20 million is due two years from now.
The development bank, founded in 2002, is a statutory authority of the Cayman Islands government. It’s primary function, according to its website, is to “promote, facilitate, mobilise and provide financing for the expansion and strengthening of the economic and social development of the Cayman Islands through lending”.
The agency is mandated to lend to anyone of Caymanian birth or status who qualifies for a loan in Grand Cayman, Cayman Brac or Little Cayman.
With regard to the country’s ongoing debt repayments, the United Kingdom has advised the establishment of a ‘sinking fund’, essentially a cash savings account where accumulated funds are used to help pay off debt in future years. However, concerns were raised last week by Deputy Premier Rolston Anglin, an accountant by trade, about whether that amount of money could be removed from the local economy.
“I think we just have to be honest with the public,” Mr. Anglin said. “There isn’t any real possibility that we’re going to be able to have that money extracted from the economy.”
The development bank and the 2019 debts are the only balloon repayments identified on government’s list of ongoing debts.
Right now, the Cayman Islands government is paying more than $30 million each year to service its debt repayment requirements.