The Tribune

By KHRISNA RUSSELL

Deputy Chief Reporter

krussell@tribunemedia.net

FINANCE Minister K Peter Turnquest yesterday defended the Minnis administration’s securing of a $750m US bond, insisting there was nothing “devious” or “surreptitious” about the way in which the transaction was handled, adding it would have a “neutral” impact on the country’s debt levels.

Speaking in the House of Assembly, the deputy prime minister sought to explain the details surrounding the government’s success at issuing the multimillion-dollar bond on the international market.

The bond, characterised as a 10-year weight average life bond, was priced at an interest rate of six per cent and is to be repaid in three equal annual instalments commencing on November 21, 2026 with a final maturity on November 21, 2028.

He made the statement yesterday in Parliament after the Ministry of Finance said the $750m bond was secured to refinance and term-out several US dollar bank loan facilities ($450m) and domestic treasury bills and bank advances ($300m).

The matter drew criticism from Progressive Liberal Party Deputy Leader Chester Cooper, who questioned in a statement the logic of borrowing US dollars to pay off Bahamian dollar loans at a time of excess liquidity in the system.

Mr Cooper said while the government boasts indicative interests in excess of $2.8bn, this was tangible proof the cupboard was never bare.

“I rise to share with this honourable House details of the government’s recent success at issuing a benchmark US $750m bond issue, which was opened to the markets and priced yesterday [Tuesday] and is expected to close on November 21, 2017,” Mr Turnquest told the House of Assembly.

“It is also important to set the record straight, as there have been numerous reports in the press and social media about this transaction – characterising it as lacking in transparency and fiscal prudence.

“Nothing could be further from the truth. There was absolutely nothing devious, surreptitious or imprudent about the transaction or the manner in which it was handled. There are certain ways these transactions are handled in the international market and we were appropriately guided by our investors in this regard.”

He also said: “During the 2017-2018 budget communication, two borrowing resolutions were approved by this honourable House. The first covered the additional funding approval of $400m to settle the outstanding arrears for [fiscal year] 2016-17 and the second was in respect of [fiscal year] 2017-18 and provided for financing to cover the overall budget deficit, estimated at $322.3m and refinancing/debt repayment obligations, which are now projected at $600.2m.

“Therefore while the total borrowing envelope under these two approved resolutions totaled approximately $1,322.7m, the increment to the outstanding debt was and remains $722.3m, as the $600.2m in refinancing/debt repayment would have a neutral impact on debt levels. In other words all we [are] doing is rolling over existing debt.”

The East Grand Bahama MP said at the beginning of each fiscal year, one of the first things that the government sets out to do, through the Treasury Department, is to develop monthly cash flow projections - based on how it perceives the evolution of revenue performance and the timing of the public outlays.

These projections are calibrated on an ongoing basis to ensure that there are sufficient funds available to meet the government’s budgetary requirements as and when needed, he said.

“It is now common knowledge that there were pressing funding needs at the end of the past fiscal year and the outset of the current period, which placed an urgent requirement on policymakers to identify immediate funding sources to meet these obligations.

“After an evaluation of the funding options, the government moved expeditiously to secure several short-term bridging facilities, which included US dollar bank credits $450m and domestic treasury bills and bank advances $300m.

“I want to emphasise that these facilities were always contemplated to be short term in nature, with subsequent terming out or repayment ie lengthening of the maturities to achieve a more favourable debt serving profile. And having considered conditions in the domestic market and the number of significant rollovers contemplated, the intention was to explore the possibility of rolling up these short-term credits into an international bond issue.”

The government, he said, in late August invited Deutsche Bank Inc and RBC Capital Markets, LLC to serve as joint managers – to examine market conditions for possible issuance of an index sized bond, that is, one over $500m and that would allow us to access more efficient pricing in the international capital markets.

As is typical with these kinds of transactions, a road show presentation was planned as an avenue for the government to meet with strategic investors and share with investors the Bahamas’ story, including government policies and strategies for achieving fiscal consolidation and dealing with the structural impediments to economic growth.

The five-day road show, which ended on November 13, took finance officials to London, New York, Boston and Los Angeles.

For his part, Mr Cooper in his statement yesterday said the government had no plan for the economy.