Government is still mulling whether it will issue a $400 million bullet bond to boost the public purse.
“The process is ongoing and the public will be advised accordingly when a decision is made,” a Ministry of Finance spokesperson told the Cayman Compass following queries for an update on the bond.
The Compass understands that, with the significant volume of fees coming in to government coffers, Finance Minister Chris Saunders has adopted a ‘wait and see’ approach before taking the step to borrow through the issuing of the bond, as government officials say he “really wants to minimise debt”.
Officials say the sticking point for any debt for the government will be the corresponding interest rate.
A government official suggested it is possible that the finance minister may rethink going for a full $400 million bond and instead tackle the issuing through smaller offerings of about $30 million.
The aim is to get a competitive interest rate in line with the under-2% interest rate that the Isle of Man was able to negotiate last year when it secured a £400 million loan.
Back in December, through a notice on government’s Bonfire procurement website, the ministry solicited bids from independent financial advisors to serve as consultants in the bond-issuance process.
Government said it would seek to have the bond underwritten by a financial institution and benchmarked against the 30-Year US Treasury Bond.
“The purpose of the bond issuance would be to provide for the general financing needs of the government and possible re-financing of existing public sector debt in the Cayman Islands,” the notice said.
A bullet bond pays its entire principal value on the maturity date, rather than in a series of payments, and cannot be redeemed early by the issuer.
Officials told the Compass last week that the invitation was not confirmation that a bond would be issued, but merely an investigatory tool to assess financial an institution’s credentials to be an independent financial advisor to government in the event that it issues a bond.
An institution’s experience and legal fees would form part of the consideration as advisor. Part of the assessment would also be what expenses would be incurred, such as commission fees, and the effectiveness of the bond issue itself.
In the face of criticism from the Opposition on the issue, Saunders argued he was simply seeking to take advantage of favourable interest rates, to solidify Cayman’s long-term financial position and fund infrastructure projects, while continuing to support those in need amid COVID’s impact.
The Opposition accused him of saddling the country with “significant, unnecessary debt” to fund budget giveaways and avoid making difficult political decisions.
The debt package government is contemplating – a $400 million 30-year bullet bond – could potentially replace existing bank loans and available loan facilities.
The finance minister said the consideration of a $400 million 30-year bullet bond was just one option to restructure government’s debt, and would offer more flexibility to address Cayman’s growing welfare costs.
At present, Cayman has a $300 million line of credit available, which was negotiated by the Progressives.
Already $10 million of that has been drawn as part of the negotiations to keep it open for use.
The Compass understands that government does not intend to utilise this facility in the immediate future.
Related Videos
DO. NOT. BORROW.
In the meantime we still await financial statements from Cayman Airways to see how much taxpayer/s money they have been swallowing over the last 3 or 4 years. Bank customers have authorised overdraft limits, whereas CAL has a bottomless well topped up automatically by Govt without limit. As always there is no accountability in Govt finance so they treat the taxpayer with contempt and keep him in the dark.
CAL took $60m from the public purse between March 2020 and November 2021. Half of that figure was a straight up hand out whilst the other half, which occured in Q2 2021, is supposedly an interest free 10 year “loan”.
However, as you quite rightly observe this is the tip of a never ending iceberg for 50 years.
For the atrocious service provided and the obscene prices CAL is NOT good value for the tax payer at all