[Updated] The Bermuda Government today [June 26] raised $475 million in 10-year bonds at 4.13% interest. $295 million will be used to refinance existing debt at a lower interest rate, with $180 million representing new debt.
This followed a roadshow by the Government across Europe and the United States which included Financial Secretary Anthony Manders, Director of International Business Travis Gilbert, Economic Advisor Hasan Durham, Director of Budget Tina Tucker and other senior officials in the Accountant General’s Department and the Attorney General’s Chambers.
The Finance Ministry said, “It should be noted that the use of proceeds included the refinancing of more expensive and shorter term debt with $180 million representing new debt. The refinancing of a $200m 4.95% loan facility due 2014 will result in savings for the country over the next 2 years.”
“The transaction achieved the lowest fixed rate bond yield ever for the Government of Bermuda, thereby substantially lowering the Government’s debt cost burden as well as its cost of funds moving forward,” said the Finance Ministry.
The Finance Ministry said the distribution went to the US [67%], Europe [30%] and Asia [3%]; and by investor type to Fund Managers [75%], Insurance/Pension Funds [12%] and Private Banks/Banks [10%].
Over 106 investors placed orders including from Austria, Belgium, Bermuda, Brazil, Chile, France, Germany, Hong Kong, Israel, Italy, Luxembourg, the Netherlands, Singapore, Switzerland, the UK and USA.
The final orderbook of $1.3 billion [4x oversubscription] enabled the Government to both tighten initial price guidance and upsize the transaction, the Finance Ministry said.
The deal was announced at 9:55am in New York, and the Finance Ministry said it attracted international demand of almost $500 million within one hour.
This morning Fitch Ratings released a statement saying they have downgraded Bermuda from ‘AA+’ to ‘AA’. “Bermuda’s debt/revenue ratio at 150% in 2011 is above the AA’ median, and is deteriorating faster than its peers.”
In the 2012 budget [PDF] Premier Paula Cox said the deficit would be $172 million, which Government proposed to finance “in part by the issue of a local bond at a competitive rate of interest.”
The full statement issued this evening by the Ministry of Finance follows below:
The Ministry of Finance borrowing strategy is set well in advance of a given financial year taking account of long term capacity to repay debt, the view of debt capital markets, the borrowing requirement signaled by planned capital investment in infrastructure for Bermuda’s sustained future and other important policy factors
As announced on Friday June 15th, 2012, the Bermuda Government conducted meetings with domestic and international investors to provide an update on economic/fiscal developments in the country, and also as part of its process of evaluating market conditions and potential funding opportunities to address its borrowing requirement as announced in the National Budget Statement for fiscal year 2012/2013.
An effective, focused and well-timed roadshow by the Government across Europe and the United States successfully educated a variety of accounts on the credit, and despite a large degree of competing supply in the market (9 other Investment Grade deals launched in the morning) the transaction attracted healthy demand and the attention of the world’s top investors.
The Government team that was involved in the Road Show were: Anthony Manders (Financial Secretary), Travis Gilbert (Director of International Business) and Hasan Durham (Economic Advisor). The Government team was also supported by Tina Tucker (Director of Budget) and key senior officials in the Accountant General’s Department and the Attorney General’s Chambers.
The Ministry of Finance wishes to thank HSBC Bank of Bermuda, HSBC Securities (USA) Inc., Butterfield Bank and Milbank Tweed (USA attorney) for their roles as strategic partners in helping to shape a very positive outcome for the Government of Bermuda in this recent issue of a public offering in the global markets.
Also it should be noted that the use of proceeds included the refinancing of more expensive and shorter term debt with $180 million representing new debt. The refinancing of a $200m 4.95% loan facility due 2014 will result in savings for the country over the next 2 years.
Highlights of the transaction are as follows:
- On Tuesday, June 26, 2012, the Government of Bermuda raised USD475 million in 10-year bonds at an all-in yield of just 4.13%;
- The transaction achieved the lowest fixed rate bond yield ever for the Government of Bermuda, thereby substantially lowering the Government’s debt cost burden as well as its cost of funds moving forward;
- The low pricing and very large orderbook confirmed that the markets continue to have a very favorable view of the Bermuda credit story despite ongoing economic challenges and the general volatile backdrop stemming from the European debt crisis;
- The deal was announced at 9:55am in New York, and had attracted international demand of almost $500 million within one hour;
- Final orderbook of $1.3 billion (4x oversubscription) enabled the Government to both tighten initial price guidance and upsize the transaction;
- Distribution went to the US (67%), Europe (30%) and Asia (3%); and by investor type to Fund Managers (75%), Insurance/Pension Funds (12%) and Private Banks/Banks (10%);
- Further expands Bermuda’s international investor base, with over 106 investors placing orders including from Austria, Belgium, Bermuda, Brazil, Chile, France, Germany, Hong Kong, Israel, Italy, Luxembourg, the Netherlands, Singapore, Switzerland, the United Kingdom and United States
Priced at a modest 25bps new issue premium above Bermuda’s existing public debt curve, and an approximate 100bps lower than the existing Cayman Islands public curve.
“The Ministry of Finance reiterates that this release does not constitute an offer of securities for sale in the United States. Securities may not be sold in the United States absent registration or an exemption from registration.”
Update 10.54pm: The PLP released a statement saying that “The PLP Government saved Bermudian taxpayers $3 million thanks to a well executed debt refinancing that secured the lowest long term bond rate in Bermuda’s history.” They also noted that “contrary to some media reports, Bermuda’s net debt now stands at $1.4 billion.”
Junior Finance Minister David Burt responded to the refinancing, “Following this offering our debt to GDP ratio will stand at 24%. Bermuda’s Debt to GDP ratio remains among the lowest in the industrialized world. The United States, the United Kingdom, Germany, France and scores of other highly developed democracies retain significantly higher debt burdens than Bermuda.”
“These are challenging times for the world and for our Island, but, I’m pleased that despite these challenges, the PLP is investing in Bermudians by providing funds for continued infrastructure investment and vital programmes such as DayCare and FutureCare. This combined with the government’s freeze in spending will continue to protect public sector jobs and support our economy as we head towards recovery,” concluded Senator Burt.
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