Government secures $US600 million bond financing

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Deputy Prime Minister and Minister of Finance K Peter Turnquest (BIS/Yontalay Bowe)

 Natario McKenzie

NASSAU, BAHAMAS — The government has been able to secure US$600 million in bond financing from international capital markets to help finance its 2020/2021 budgetary needs and repay debt.

The transaction will add an additional $352 million to the debt level of the country, and falls within the $1.334 billion in approved financing for the current fiscal year.

The proceeds of the issuance will be used to finance the Government’s general 2020/2021 budgetary needs and to repay its indebtedness of US$248 million under the 2020 Bridge Facility.

According to a statement from the Ministry of Finance, The Bahamas successfully priced a US$600 million issue of 8.95 percent bonds, due 2032 in the international debt capital markets.

The MOF said the new transaction benefited from the momentum created during a successful virtual investor roadshow that The Bahamas conducted on October 5 and 6, 2020, at which time the Government met with over 45 global investors.

“A team from the Ministry of Finance, led by the Deputy Prime Minister & Minister of Finance, and including the Acting Financial Secretary and the Director-General of the Ministry of Tourism, presented investors with an update on economic and financial trends in The Bahamas, as well as the Government’s recent policy initiatives for combating the COVID-19 pandemic and plans for reopening of the tourism sector,” the Ministry of Finance said.

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 11-year weighted average life bond was priced with a coupon (interest rate) of 8.950 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.

Commenting on the transaction, Finance minister Peter Turnquest said: “Given the strong shock to the Bahamian economy caused by Hurricane Dorian and now COVID-19, we are satisfied with the successful pricing of this bond issue and the positive response from the investor community, which 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 and achieve debt sustainability and to pursuing the structural reforms that would release a strong level of economic growth.”

Turnquest added: “…(This) will improve The Bahamas’ prospects for enhancing its funding cost fundamentals vis-vis the credit markets.”

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.

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

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