The Cayman Islands government will not be allowed to take on more long-term debt in the next three years, but will seek to refinance large amounts of debt that comes due later in the decade.
Finance Minister Marco Archer, in agreeing to a four-year budget plan with the United Kingdom government earlier this year, revealed that paying off large amounts of debt the government will have to pay between 2015 and 2019 involves the partial amortization of that debt.
The idea is, in the short to medium term, for the government to retire tens of millions in debt prior to a June 30, 2016 deadline set by the U.K.
“The government proposes, at a minimum, to further reduce core government debt by approximately $71.2 million before the end of June 2016,” according to the four-year plan agreed with the U.K. The major looming debt repayment is a $261 million (US$312 million) bullet loan due in November 2019. That debt stems from a 2009 bond issue the government offered to help make ends meet during the global economic downturn.
A bullet loan is one where the entire principal becomes due at one time.
Mr. Archer acknowledged in the four-year plan that government would have “limited scope” to fully pay off the debt when it comes due in 2019.
“The government will explore opportunities to renegotiate the terms of that bond with a view to potentially place half the existing principal on an amortizing program while setting aside the funds to retire the remaining half [in 2019],” he said.
Financial Services Minister Wayne Panton said last week in the Legislative Assembly that the Cayman Islands Development Bank has $30.5 million of debt due in bullet or balloon payments in 2015.
According to previously released government records reviewed by the Caymanian Compass, there are five bullet loans taken out on behalf of the development bank that have due dates listed as: April 2015 ($20 million), June 2015 (two payments totaling $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 two payments of $20 million and $11.8 million are due during next year’s budget. The remaining $10 million in payments are due during the 2015/16 budget.
“[This] leaves a very tight timetable and time line for strategies and actions for the bank,” Mr. Panton said.
Mr. Archer, in the four-year financial plan, said other opportunities were being explored for the retirement of similar bonds that come due next year.
The four-year financial plan also makes reference to another bond which comes due in 2016.
Mr. Archer said the government would seek to renegotiate the terms of repayment, which require $15.4 million per year to pay the loan principal aside from interest owed.