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Government in $620m debt sale

Market move: a total of $620 million of senior notes has been listed by the Bermuda Government on the Bermuda Stock Exchange in a move to refinance part of the national debt (File photograph)

As part of a manoeuvre to refinance a portion of the island’s $2.42 billion net national debt, the Bermuda Government has listed $620 million of new senior notes on the Bermuda Stock Exchange.

The notes are for qualified investors, who will be paid 4.75 per cent interest on their invested money and have their principal returned in 2029.

For the Government, it means it will be paying out a lower rate of interest to some investors compared to the rates it was paying on hundreds of millions of dollars of older senior notes that it sought to repurchase this month as part of the refinancing move.

However, the period of time it will be paying out interest on the new notes is longer than for the older notes, which had due dates in 2020 and 2024.

In going to the market, the Government was also looking to meet additional borrowing requirements. It appears to be in a position to do that through the size of the new issuance.

As part of its debt refinancing, the government offered to repurchase a chunk of its outstanding bonds earlier than the due date on those senior notes.

A total of $466.5 million of the older notes had been validly tendered by investors when the offer period expired on November 15; that consisted of $86.5 million of the 5.603 per cent notes due in 2020, and $380 million of the 4.854 per cent notes due in 2024.

The Government has not yet announced the amount of tenders of each series of the older notes that it has accepted.

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.

Estera Securities (Bermuda) Limited is the listing sponsor of the new senior notes.