Bermuda Government Borrows $750 Million

July 31, 2013

The Ministry of Finance confirmed that they have raised $750 million in 10-year bonds at a yield of 4.85%.

As Bernews reported yesterday, Barclays and JP Morgan, acting as managers for the Bermuda Government, offered a $750 million bond for sale at an interest rate of 4.854%.

A statement from the Ministry said, “The Bermuda Government conducted meetings with 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 implement the Ministry of Finance’s new multi-year borrowing strategy as announced earlier this year.

“This strategy will give the Government certainty of financing instead of borrowing on a year to year basis in a rising interest rate market. The Government will be locking in low rates saving tens of millions of dollars in interest cost.

“An effective, focused and well-timed road show 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 the transaction attracted healthy demand and the attention of the world’s top investors.”

Finance Minister Bob Richards previously said that this bond issue is anticipated to cover three years of operating deficits, and that borrowing it all at one time will save tens of millions of dollars in financing costs.

Highlights of the transaction, as provided by the Ministry, include:

  • On Tuesday, July 30, 2013, the Government of Bermuda raised USD750 million in “long” 10-year bonds at a yield of 4.85% – for a spread to US Treasuries of 225 basis points.
  • The transaction represents the largest ever bond transaction and lowest ever bond spread for the Government of Bermuda, underscoring Bermuda’s continuing ability to lower its credit premium in the market, while funding meaningful size.
  • The low pricing and very large orderbook confirmed that the market continues to have a very favorable view of the Bermuda credit story despite ongoing economic challenges and the general volatile global rate backdrop.
  • Despite a volatile market backdrop, where Emerging Markets issuance volumes had virtually dried-up, the transaction attracted healthy demand and the attention of the world’s top investors.
  • The deal was announced on July 30th at 9:30am in New York as “benchmark size – targeted at $500 – 750mn”, and attracted international demand of almost $750 million within one hour.
  • The Government was able to move pricing tighter from initial guidance of T+237.5 – 250bps to revised guidance of T + 225 – 237.5bps, to ultimately price at the tight-end of guidance.
  • The final orderbook of over $2.25bn billion (3x oversubscription) enabled the Government to both tighten price guidance and upsize the transaction.
  • Bermuda was able to further expand its international investor base, with over 175 investors placing orders across the United States, Europe and Bermuda focused on a combination of high quality fund managers and insurance companies.
  • Ultimately, the Government priced the transaction at a modest 20bps new issue premium above Bermuda’s existing public debt curve.

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Comments (58)

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  1. Worker says:

    can i borrow 100 million? lol

  2. Jus' Askin' says:

    OBA is a joke ;-)

    • 1minute says:

      They have to service the debt given to us by the PLP

      • Jus' Askin' says:

        PLP 1.4bn in 14yrs
        OBA $750mn in 7 months
        Do the math ;-)

        • Double Standards says:

          Borrowing for three years worth of budget deficits created by the PLP spending machine…thus this bond will be the last.

          Unlike the PLP who borrower for several consecutive years.

          And on top of that the financial obligations of the BDA Govt haven’t just popped up overnight now, have they? No, they all came to fruition that was the spending machine called the PLP. Min. Gibbons even highlighted, earlier in the year, how the Govt was forced to borrow from a local bank because if they didn’t they wouldn’t be able to make payroll due to the PLP’s mishandling of the finances.

          So if the OBA decided to seriously cut back on Govt spending then the likes of you would say how they hate Bermudians and are nothing but an austere conservative Govt.

          OBA is far from perfect, but it would help this island if zealots (like yourself) would actually admit that we are where we are due to the mishandling of Bermuda’s economy and finances.

          So jokes on you.

          • Portia says:

            “Borrowing for three years worth of budget deficits created by the PLP spending machine…thus this bond will be the last”

            So what happens in the fourth year – are you assuming we will no longer have a budget deficit then? What if we do? We will have no choice then but to borrow again – except any savings we might be getting now will be non-existent then – once we receive another downgrade.

            I didn’t like it when the PLP borrowed – but at least they borrowed only what was needed at the time. When you suddenly take on a large amount of debt, that affects your credit rating, making a further downgrade imminent. Further downgrades means the cost of borrowing goes up – or you reach your limit altogether.

            Without a clear plan as to what the Government is going to do in year 4, there is a distinct possibility that we are tying our hands here.

            • Double Standards says:

              The whole point is to provide time to bring down the deficit…

              Immediate cuts, or austerity, would only prolong the recession (depression?) that BDA finds itself in…

              • Portia says:

                Bring down the deficit and then what? What happens in the fourth year, if we (very likely) need to borrow again? It seems the OBA have only made a plan for the tenure of this term, and not beyond.

        • Truth (Original) says:

          You clearly don’t know enough to have the discussion. This funding is for the next 3 years and at a much better rate than we would have gotten had done this one year at a time. Further, the debt left by the PLP was very much in excess of 1.4B, especially if you throw in the pensions unfunded liability of over 2B.

          I guess this is all Latin to you. Suffice to say, Bermuda is very fortunate to have the OBA at the helm.

        • MJ says:

          @Just Assin…think about if for a minute. The PLP got us into this mess, nobody else. That IS A FACT! The OBA are trying to save us from further debt buy borrowing now while interest rates are low.

          If you want to REALLY do the math. Start with the numbers regarding debt PRE-PLP and work your way forward.

          I await your MATH – wiz kid!

          • Jus' Askin' says:

            Prior to PLP there was no debt on the books.
            I do believe $500mn we had on the books ;-)

            • Sandy Bottom says:

              No, nonsense. Up until about 2006 we had been running for 15 years with around $100-$150m consistently. No debt increases. No drama. Minimal carrying cost. And then Paula Cox and Ewart Brown got hold of it. Ewart had an agenda to ruin the country while living like a billionaire dictator. Cox had no agenda, no brain, no balls, no frikkin clue what was going on. Between them they spent $1.5bn more than they collected, in 5 years.

        • jt says:

          if that’s extent of your math ability we know why we are where we are

      • Vote for Me says:

        This is not true. The money for the 2014 debt repayment is in the Sinking Fund. the OBA will not be able to ‘trot out the lie that it is the PLPs fault much longer’. They simply need to make the hard decisions to cut spending.

        • Double Standards says:

          And then I imagine you will be one of the first to say how the OBA hates Bermudians and workers due to the cuts.

          So either way they will never win in your eyes.

          Stop acting like you guys care about BDA’s finances all of a sudden. You were cheerleaders when the PLP spending machine sqaundered and looted the public purse, but now you are all economic gurus who care so much about our finances.

        • Truth (Original) says:

          @Vote for me- Dude, the sinking fund was at an all time low when the OBA took office ! They have been systematically topping it up so we can have some funds put aside. Please don’t act like we’ve had this cushion to fall back on all this time.

          The public reserves the right to be able to recall the PLP ineptitude for many years to come. That Party nearly destroyed bermuda. You need to wrap your head around the magnitude of that reality.

          • Vote for Me says:

            You clearly do not know what you are talking about!! The sinking fund is funded at 2.55 of the debt outstanding as at the previous year. The PLP have been therefore putting the funds aside as required. Thus your comment about it ‘being at an alltime low’ is completely ridiculous.

            To date the OBA has not made any payments into the sinking fund, nor have they been required to do so.

            As for general comments, this is a serious issue for Bermuda and Portia is correct. We need to know what will happen in year 4 since we will not be able to borrow any more funds and we therefore need to decide how to reduce the deficit now.

            • Sandy Bottom says:

              You say the PLP were “putting the funds aside as required” . Wrong. In fact, the PLP passed laws to excuse annual sinking fund contributions. The contributions to the sinking fund were not “put aside as required” by thevPLP.

              And in 2012, as a result of revenues being less than budgeted, and expenditures more than budgeted, thebPLP took over $50m from the sinking fund to ” help meet interest payments on debt”.

              The PLP left the debt, the sinking fund, and the economy, in a stinking mess.

              And now it turns out the PLPs shadow finance minister is a bootlegger, carrying on a “business” that could land him in prison. What an absolutely pathetic joke.

    • swing voter says:

      4 letters 4 u in language you would undersatnd buddy …. STFU

      • Jus' Askin' says:

        Make Me ;-)
        OBA is a JOKE

        • swing voter says:

          ppl like u ain’t gon b satisfied until we all go down the drain, rich and poor and everyone in between….IDIOT

          • Jus' Askin' says:

            Drain? Bermuda is alresdy in the pit m8 ;-)

            • Sandy Bottom says:

              You already proved you know nothing about what happened.

  3. watching says:

    I have little issue with them borrowing the money, but more issue with the fact that before Dec 17 the word BORROW was a bad word…but now they are borrowing 750M in one fell swoop.

    I thought Min Richards had a cure for the economic crisis? I thought the crisis was all PLP’s fault? If so, surely the election of the OBA would be a cure all for our economic woes…

    But we aren’t seeing anything new from the OBA and Minister Richards.

    • JD says:

      Thats not really true now is it. We’ve seen a 4.6% cut in government wages, a proposal to freeze hiring, and they must be doing something right becasue we’ve seen a jump in new companies setting up here, and some transactions in the hospitality space.

      You surely can’t be so naive to think that someone would wave a mgic wand and all the problems would be cured overnight. Bermuda is a relatively small economy but it is still a ntional economy. You can’t change its direction all at once. Try to think of it as driving a large ship, you need to make incremental adjustments to get to your goal. So far I’m liking the adjustments I’m seeing, we can debate whether it is enough, but its something.

  4. Vote for Me says:

    This is a serious step for Bermuda. The rate is less than 5% which is probably good in the long run. Based on previous statements, we should expect a $50m Bd$ bond issue.

    Everyone take note!!! This is probably the last time that government can borrow money. Therefore the OBA needs to make sure we reduce government spending by at least $330,000,000 (yes, thats $330 million) a year before we get to April 1, 2016 or we will have our own fiscal cliff.

    Also, do not be surprised if there is a further downgrade in Bermuda’s Sovereign rating as a result of this borrowing.

    Finally, this borrowing can not be blamed on the PLP. It is entirely the OBA since they have the authority to determine annual revenues and expenditures since April 2013 (this year). If anyone looks at the interim SAGE report, it shows that the current deficit is actually higher thatn any of the deficits that the PLP had!! The OBA have to be bold and make the necessary decisions to cut spending since government revenues are not going to realistically increase in the near future.

    • Double Standards says:

      So the rise in debt which occurred from 2008 onwards has nothing to do with the PLP?

      This island is stuck on stupid.

      • watching says:

        The point is that the OBA is the government now and despite what election rhetoric they spoke, they need to govern and make decisions. Whether you think the situation is caused by the PLP or UBP or any other P, at the end of the day the OBA wanted to govern, said they had the solutions and now have the ability and position to enforce them. Now it is time for them to cut costs and expenses, not just politic.

        • Double Standards says:

          And the biggest cost is Govt employee wages/benefits…

          So when the cuts you want actually do happen I imagine you will be part of the crowd shouting about how the Govt hates Bermudians and their callous cuts exemplify this blah blah blah yada yada yada…

          So a no win situation for the Government.

          I have said the PLP deserved to win the election on December 17 2012. They created this mess and now the OBA will take the blame for righting the ship.

          Unfortunately they didn’t and now want to pretend like none of this is their doing.

      • DarkSideofTheMoon says:

        Then leave.

        • Double Standards says:

          Becareful you are sounding to sound like Pettingill…


          Like I said: stuck on stupid

    • Um Um Like says:

      You’re a real ****** dumbass!

    • Truth (Original) says:

      @Vote for me- you know just enough to be stupid.

      • Vote for Me says:

        I would not normally respond but I know the strength of my arguments based on responses. Your inability to refute my comments make the point.

        Do a little research – you will be surprised at how well founded my comments are!

        • Sandy Bottom says:

          Except you’re full of s**t about how the PLP managed the sinking fund.

  5. crystal says:

    @Double Standards: I like the way you think!

  6. Nuffin but da Truth says:

    would now be a good time to ask for a few dollars from the Bermuda Government cus I’m friggin skint!

  7. Time Shall Tell says:

    I remember when the OBA raised the debt ceiling & alarm bells where rang, the OBA defenders called anyone who question the move all sorts of nasty name. It was said that the people who questioned didn’t know what they where talking about because there’s a difference between raising the debt ceiling & actually having the debt. The next logical question which no one at that time was able to make a sensible reply to was, why raise the debt ceiling unless you actually planned to actually raise the debt. Now we know & even still the blind defenders are all standing guard diligently on their posts without even bothering to ask any questions…. Party politics needs to end.

    • MJ says:

      Think back my friend. How much did we REALLY know at the time since the PLP rarely told the entire truth. Could we trust what we heard back then.

  8. plaza says:

    no one sees pass the smoke yet ? its a dam shame all these smart brainey folks but all the heads are so deep in the sand ,

  9. Jus' Askin' says:

    It amazes me that someone tries to sell swizzle online and there are numerous comments but $750 mn more has been added to our national debt and very few are bothered.
    WE the people of BERMUDA are to blame for our situation. WE focus on things that are not important and then want to point fingers at others when things go bad.

  10. Glenn says:

    Are we to dispel the creditability of the Ratings Agencies – the lowering of Bermuda’s standing, consequent to the Old Boys Assoc.’s plan (or lack there of)in borrowing more than $2.4billion, to address the Island’s debt?
    Blind loyalty, is just that, ‘blind loyalty’!

    • Sandy Bottom says:

      The rating agencies reacted to the deterioration in the economy over the past five years, not thevpast six months. You only have to read what they said. Every time the government attempts to reduce spending it’s portayed by the PLP as “anti Bermudian” or “unfair”. The PLP spent us into an absolute mess.

  11. plaza says:

    yup I agree , its all these brainey folks living in a paradise sort , all the wealth and money but just cant see though the SMOKE ! it’s always been eazyier to contain and control a small group of folks in dif a small area and a contained area too ! BERMUDA we are got to wake up and shake the spell , do a proper hi-tec research in wats really going on here they give u the tools u are just got to use them the write way !

  12. plaza says:

    the ratings boys work for n with the big boys dat print da money ok so u work dat out ! they have a job to do .

  13. plaza says:

    if yall wana worry bout stuff ! worry bout who make dat money n I mean who print n sell to us all n why n wat it all funds ! than ya u all r just picking to pick …..

    • Sandy Bottom says:

      Burt, have you been sampling that unsold swizzle?