Govt’s $600 million foreign currency bond fully subscribed

The government has now secured most of its budgeted, historic $1.3 billion debt cushion, given that its $600 million foreign currency bond, which was announced last week, has been fully subscribed through more than 140 investors, according to a statement released by the Ministry of Finance (MOF).

“The order book closed with indications in excess of US$1.1 billion and with over 140 accounts participating, including many new investors in Bahamas debt,” the statement noted.

“The 11-year weighted average life bond was priced with a coupon (interest rate) of 8.95 percent per annum, payable semi-annually in arrears, with principal amortization payable in three equal annual installments, commencing on October 15, 2030 and a final maturity date of October 15, 2032.”

The statement revealed that Credit Suisse Securities (USA) Inc. and RBC Capital Markets, LLC managed the bond offer as joint book runners.

Last week, the government issued the $600 million, unsecured foreign currency bond with a 9.25 percent yield. The offering was reportedly released on Wednesday.

Financial experts revealed that the high coupon told a tale of The Bahamas’ credit rating downgrade to junk bond status by Moody’s and the country’s continuing dependence on a depressed tourism market.

The government has gone to international markets in hopes of covering half of its projected $1.334 billion fiscal deficit for 2020/2021, brought on by the devastating consequences of Hurricane Dorian and the economic effects of the global COVID-19 pandemic.

The statement noted that the bond transaction will add an additional $352 million to the debt level of the country.

The government listed its use of proceeds as “general 2020/2021 budgetary needs and the repayment of $248 million under 2020 bridge facility”.

Deputy Prime Minister and Minister of Finance Peter Turnquest said the government is satisfied with the “successful pricing of this bond issue and the positive response from the investor community”, which he said “reflects the market’s ongoing confidence in The Bahamas”.

“Despite the interruption in our fiscal consolidation objective, the government is undeterred in its commitment to pursue a credible fiscal policy, achieve debt sustainability and to pursue the structural reforms that would release a strong level of economic growth,” Turnquest said.

The government announced last month that it had already closed on about half a billion in financing over July and August and revealed then that it would go to capital markets to access more financing when market conditions were right.

The government received $200 million from the Inter-American Development Bank (IDB); a $40 million facility with the Caribbean Development Bank and, in August, accessed $248 million as part of a $300 million bridge financing deal approved by Parliament for the fiscal year 2020/2021 budget.

“Consistent with its debt management strategy, the Government intends to establish a sinking fund to assist in managing the future repayment obligations arising from this debt issuance,” the statement said.

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source https://thenassauguardian.com/govts-600-million-foreign-currency-bond-fully-subscribed/