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Government in $500m debt sale

Debt refinancing: Curtis Dickinson, the Minister of Finance

Bermuda is preparing to sell at least $500 million in new notes next week, the Latin Finance website reported.

The manoeuvre is aimed at refinancing government debt in an effort to lock in a favourable interest rate, while also meeting additional borrowing requirements.

The website reported that the Government had worked with global banks Citi and HSBC, who had facilitated meetings with prospective investors in New York and Boston.

It cited sources saying that the bonds would most likely mature in ten to 30 years.

Most of the money raised from the offering will be used to buy back bonds. The Government last week made an offer to redeem senior notes with an aggregate value of up to $424 million through a tender offer to investors.

The debt in question comprised all $224 million of the notes due in 2020 that pay investors a 5.603 per cent rate of interest and up to $200 million of the 2024 notes that pay 4.854 per cent.

The results of the offer were announced yesterday, showing that $86.543 million of the 2020 notes were tendered and $377.957 million of the 2024 notes.

The Royal Gazette asked the Ministry of Finance for the size of the notes sale and when its pricing will be revealed.

A spokesperson for the Ministry of Finance said last night: “The Ministry will not be in a position to comment on the transaction until it closes. It is anticipated that it will close next Tuesday.”

Last week, the finance ministry said in responses to questions from The Royal Gazette on the debt rollover: “As announced in the 2018-19 Budget, the Government will have to incur new borrowing of $89.7 million to finance the 2018-19 deficit.

“The Government has also decided to refinance an outstanding $135 million credit facility that matures in 2019, and subject to market conditions, refinance current government bonds maturing in 2020 and 2024.”

The $135 million credit facility mentioned appears to refer to an 18-month loan facility with Butterfield Bank that was made public last December.

David Burt, then finance minister, said at the time that the facility was competitively priced at 4 per cent and would lower the Government’s weighted average cost of borrowing.