Bermuda Government Offers $750 Million Bond

July 30, 2013

[Updated: Barclays and JP Morgan, acting as managers for the Bermuda Government, have offered a $750 million bond for sale at an interest rate of 4.854%.]

The Government of Bermuda is planning to issue a US dollar-denominated bond maturing in February 2024, according to a report from Reuters this morning.

Earlier this month the news agency reported that the Bermuda Government mandated Barclays and JP Morgan to arrange investor meetings in the United States and Europe ahead of a potential international bond issue.

They said the meetings were to take place in New York last Wednesday, Boston on Thursday, Los Angeles on Friday and conclude in London yesterday [July 29].

According to their report, Finance Minister Bob Richards, Finance Secretary Anthony Manders and Director of International Business Travis Gilberts were scheduled to attend the roadshow.

Last month Minister Richards said the next bond issue, expected this summer, is anticipated to cover three years of operating deficits, and the government will borrow in the range of $400-$800 million.

Minister Richards said that borrowing three years worth of deficits now will save tens of millions of dollars in financing costs.

“We judge that we are in the last phase of the ultra- low US$ interest rate cycle. As the US economy gains strength, US$ interest rates, and therefore bond yields and borrowing costs, are highly likely to rise,” said the Minister.

Shadow Finance Minister David Burt previously said that the Government’s plan to borrow up to $800 million to cover three years of operating deficits is risky but it could pay off, and the Opposition will take a “wait and see approach” on the matter.

When queried about the bond issue last week, a Ministry spokesperson said, “As it does from time to time, The Bermuda Government will be meeting 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. Due to Restrictions on Publicity for this process the Ministry is unable to make any further comments.”

Update 4.15pm: Effective today, Barclays and JP Morgan, acting as managers for the Bermuda Government, have offered a $750 million bond for sale at an interest rate of 4.854%, which means the Government will borrow $750 million. Further details are limited at this time, however we will update as able.

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  1. Bermuda Government Borrows $750 Million | | July 31, 2013
  1. Vote for Me says:

    On the face of it, borrowing money when rates are low makes sense.

    The question is what happens at the end of the 3 years? MP Richards and his fellow Ministers should be giving more information about his 3 to 5 year financing plan. Do we intend to run annual deficts of $300m and then suddenly stop in year 4?

    Or is the OBA really sorting out financing for the next 3 years or so and leaving the real solution to the next government? If we read the latest Fitch commentary, they have commented negatively about Bermuda’s fiscal plans (i.e. how much we are spending each year). If there is no significant reduction, we should expect another downgrade after the money is borrowed.

    • JD says:

      Did you miss the 4.6% reduction in government payroll and the freeze in hiring?

      How about everything SAGE is saying. More will have to be done, but I really do not get the impression that the current government is ignoring the situation and leaving the real solution for the next government.

      • Vote for Me says:

        @ JD
        The 4.6% is estimated to save $25m. There needs to be an annual savings of $300m. Thus $25m is a drop inteh bucket. Does he plan to reduce the Civil Service by 20% for example??

        I accept that there will be some savings if the government acts on the SAGE receommendations. The reality is that the decision to borrow up to $800m has been made before the SAGE report. Therefore MP Richards should provide more information on the basis for his decision. He can not wait until after the fact when SAGE finishes its report.

        • Truth (Original) says:

          Do you really believe that they are trying to float things until a new Govt comes in?

          It seems to me that they are desperately trying to address Bermuda’s overspending whilst simultaneously trying address Bermuda’s astronomical borrowing costs.

        • watching says:

          Also, that savings is based on all the workers taking that one day off. I read somewhere that if the workers choose to work that day off they will be entitled to overtime pay. I would have thought that the day off would be mandatory.

      • Where ya been says:

        There hasn’t been ANY freeze in government hiring. So don’t make things up.

    • Mac says:

      Bigger question is why on earth did it take us so long to do this deal? In late May and early June the Bermuda 2023 bonds traded under 3.75 percent and every country on the planet was racing to the markets with 30 and 40 years bonds to take advantage of low treasry rates. Friends in the business tell me Bermuda probably could easily have priced a 10 year deal at 4 percent or below at that time. But instead we take our time and decide to go yesterday when the Bermuda 2023 had skyrocketed to over 4.50 percent and treasuries over 2.60. I am no math wizard, but a 4.845 rate costs $6.4 million a year in interest payments more than a 4.0 rate. That is a difference of $64 mlllion over 10 years that we could have saved for our children. $64 million!!! where is the accountability. Why did we not do better and who will take responsibility for this masssive waste and burden we cannot afford?

  2. Vote for Me says:

    Oh and what about buy Bermuda?? Where is HSBC or BNTB as arrangers??

    • Sandy Bottom says:

      They’re selling $750m in bonds, not buying a pair of shoes.

    • plaza says:

      do u really overstand this stuff ? maybe u should keep them kindagarden type comments to yaself …

    • Buy Bermuda? says:

      First, BNTB doesn’t have the resources to handle something like this.

      And to your point – HSBC Bermuda is 100% owned by HSBC Group – there is no Bermudian ownership whatsoever.

    • lolz says:

      Yeah nothing shouts Bermuda Pride louder than Hong-Kong Shanghai Corp.

  3. Rhonda Neil says:

    How many officers is the Prison advertising for… was it 10….

  4. Mac says:

    And what happened to the public debt advisory team that was formed early in the year? Nowhere on earth does a country have an undisclosed group of individuals advising a minister of finance like we do here. They must also be held accountable given the delay and waste of this deal – who are they, what is their experience, do they have any conflicts or ties to the arrangers, how were they chosen? The people deserve to know these answers in the wake of this almost 5% deal that investors seemed to love and for which we wil l pay dearly for many years to come.

  5. Bermewjan says:

    It is what the does with the money raised that is not immediately required to service the debt that really interests me.

    Investing the funds into a reinsurance sidecar for our top ten performing underwriters would potentially allow 5 or 6 fold premiums to be written, that even with a 10% call would mean a 4 plus fold return on the investment in a single calendar year.

    Massive returns with minimum loss are available at those levels of funding which could have the government debt paid off in 2-3 years followed by bolstering the social pension fund and creating a significant subsidy for the hospital, educational improvements and eventually it might even be possible to provide hotel building subsidies.

    • Mike Hunt says:

      Massive returns with minimum losses? Sounds like a ponzi scheme to me.

  6. plaza says:

    u r a dreamer

  7. plaza says:

    none of u older jokers n jokettes no squatt ! its the big picture here , its some bigger things going on with the rats that r trying to pull Bermuda out of this money problem but u all as Bermudians need to do your research first n hard n stop being so dam gullible n going with everything u see or here on cnn ,cbs , bbc or nbc . u got to go hi-tec on ya research Bermuda .