The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank of the Bahamas’ governor last night confirmed that the Government’s latest $100 million bond issue was “oversubscribed”, with a portion of the funds raised potentially funding its share of Baha Mar’s infrastructure works.

Wendy Craigg confirmed that the latest Bahamas Government Registered Stock (BGRS) issue had been fully placed, telling Tribune Business: “It was oversubscribed.”

Commercial banks, institutional investors and high net worth individuals had bought in, the Governor confirmed, taking the Government’s total fund-raising for the fiscal year to-date to $300 million.

The latest BGRS issue’s success is probably as much a reflection of the appetite for government debt paper as it is the lack of alternative, attractive fixed-income investment instruments in the Bahamian capital markets.

James Smith, a former minister of state for finance who is now a key Ministry of Finance consultant, told Tribune Business: “You’ve got a huge amount of excess liquidity in the system, and the Government is one of the few institutions offering long-term savings instruments which certain industries are looking for.

“The insurance industry needs to match its long-term assets to long-term liabilities, and the banks are paying on short-term [deposits] less than 3 per cent.

“The interest rate they’re offering in this environment is probably attractive compared to other forms of investments in the Bahamas.”

The BGRS issues are needed to raise debt financing to fill the hole being created by this year’s projected $550 million deficit. However, Mr Smith said much of the previous $200 million bond issue - around $140 million - went to cover expenses due from the previous period.

“There will be any number of commitment almost immediately applying,” Mr Smith said in relation to the latest $100 million tranche. One of those was likely to be the Government’s $48 million share of Baha Mar’s infrastructure and roadworks.

While weak private sector credit demand meant it was relatively easy to place large BGRS issues, Mr Smith said that if the economy began to move - and businesses needed funds - then the problem of the Government ‘crowding out’ commercial enterprises from needed financing might loom large.

And, while the Government needed to “reverse”the growing debt and deficit trends, Mr Smith said the Bahamas’ debt metrics meant BGRS paper still remained relatively attractive - especially when set against other countries.

The former finance minister said there was “still some room”, with the Bahamas’ debt-to-GDP ratio between 50-60 per cent, and debt servicing costs below 20 per cent of government revenues.

The $100 million issue, which closed last week, had a range of maturities between 2016 and 2032, and is split into six different tranches.

The tranches varied in amount, between $10 million and $30 million, and are prices at rates between Prime (4.75 per cent) and Prime plus 0.0625 (4.8125 per cent).