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Government’s bond tender offer results

The Bermuda Government's repurchase of outstanding bonds worth hundreds of millions of dollars is expected to conclude tomorrow as it refinances part of the $2.42 billion net national debt.

At the same time, the Government is reportedly preparing to sell at least $500 million in new senior notes to cover the cost of buying the older ones and meet additional borrowing requirements.

The portion of the debt in question is comprised of all $224 million of existing senior notes due in 2020, which carry a 5.603 per cent interest rate. At the close of the offer period on Thursday, a total of $86.5 million of those notes had been validly tendered.

The Government was also looking to purchase up to $200 million of its existing senior notes due in 2024, which carry a 4.854 per cent interest rate. A total of $380 million of those notes had been validly tendered by the expiration of the offer period.

Investors who redeem their senior notes have their invested money returned, along with any accrued interest as described in the terms of the offer.

Settlement of the tender offer is expected tomorrow, although it is conditioned, among other things, on the closing of an offering of new notes. The size and pricing of the new notes is not yet known, although the Latin Finance website has reported it could total at least $500 million.

The Ministry of Finance has said it will not be in a position to comment on that transaction until it closes.

The Government is expected to announce the amount of tenders of each series of existing notes that have been accepted, and whether any proration of tenders of the notes due in 2024 has occurred.

The US Federal Reserve is expected to raise its influential Fed Funds rate by a quarter of a percentage point next month and another three times next year. The Ministry of Finance may see now as an opportune time to lock in a favourable rate on a large slice of its debt before the rate rises take effect.

Financial move: the Bermuda Government is refinancing part of the national debt (Photograph by Akil Simmons)

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Published November 19, 2018 at 8:00 am (Updated November 18, 2018 at 11:59 pm)

Government’s bond tender offer results

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