Cayman secures $330.4 million in emergency line of credit

The Cayman Islands government will have access to a line of credit up to $330.4 million to help deal with the economic fallout of the COVID-19 pandemic, Finance Minister Roy McTaggart announced today.

McTaggart, speaking at a government press briefing, said a consortium comprising four local banks had committed to making the money available.

The government is paying $1.96 million to establish the line of credit in place, regardless of whether it accesses it or not.

The minister and Premier Alden McLaughlin both stressed that the government had enough money in its coffers to cope with the current situation and was unlikely to need to access the line of credit until at least the middle of next year.

McLaughlin said in a statement, “Whilst we have access to this line of credit, we do not expect to need to use it before the end of the second quarter of 2021. In effect, this is a much needed ‘insurance policy’ for the Cayman Islands.”

McTaggart said any use of the line of credit will be converted to a long-term loan with the consortium.

Both the loan and line of credit have an interest rate of 3.25% per annum, which, the minister pointed out, is the current prime rate offered by local banks.

The line of credit will expire in 18 months, the minister said. Any amount advanced and unpaid under the line of credit will be converted to a 15-year, fixed interest rate amortising loan.

“The terms submitted in the bid are keenly competitive,” the finance minister said, adding that this demonstrated that Cayman Islands government was regarded as a “high-quality sovereign as is reflected in our Moody’s rating of Aa3”.

Government had been seeking a $500 million line of credit and issued a request for proposals in June.

McTaggart said an appropriation for a possible $500 million borrowing will be presented to the Legislative Assembly at its next meeting and to the Foreign, Commonwealth and Development Office for approval prior to accessing any of the funds from the line of credit. This appropriation would include the potential $330 million loan under the consortium’s line of credit, as well as an additional loan of up to $170 million “if it becomes necessary”, he said.

In response to a question at the press briefing, the minister said he believed the possible $500 million loan should be “very, very sufficient” in the short to medium term and give Cayman a “significant cushion to continue to weather the trials of COVID”. He added that the government would exhaust its own reserves before borrowing any of the available funds.

The premier told reporters that if COVID ceases being a major international health issue and tourism in Cayman bounces back, the islands may not need to use the money at all. However, government felt it was worth paying $1.96 million to ensure the funds were accessible “as a premium on that insurance policy”.

He added that as a result of having the loans available if needed, Cayman did not “have to worry about cutting civil servants’ salaries, we don’t have to worry about stopping government projects, we don’t have to worry about where are we going to find the money to help businesses and the vulnerable in our community over this period”.

McTaggart said any use of the funds “will address needs resulting from government’s loss of revenue and its increased expenditure related to COVID-19 – particularly increased expenditure by Government to support the vulnerable in our community and business entities across the Islands that have experienced financial hardship as a result of the pandemic.”

The banks and the amounts they are making available are:

  • CIBC FirstCaribbean International Bank (Cayman) Limited: $94.3 million
  • Butterfield Bank (Cayman) Limited: $117.26 million
  • Cayman National Bank Ltd.: $94.3 million
  • RBC Royal Bank (Cayman) Limited: $24.6 million

CIBC FirstCaribbean International Bank is the structuring and administrative agent for the consortium, while Butterfield and Republic Bank Limited and CIBC FirstCaribbean International Bank were the lead arrangers, McTaggart said.

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