Opposition Finance Minister Bob Richards has expressed major concerns about the sale this week of $500 million worth of Bermuda Government bonds

Tuesday's debt issue, which offered ten-year bonds at a fixed 5.6 percent interest rate, proved popular with many institutional investors both here and abroad.

Yet Mr. Richards claimed yesterday that the bond issue was "an expensive exercise and the Finance Ministry should take no accolades from it".

"Everyone has to understand that this issue is just a handling of the debt that already exists," Mr. Richards told a press conference yesterday.

"I think the Government was trying to make it out as some sort of success, but really it is just taking short-term debt, bundling it up and making it a long-term debt."

The sale generated an order book of $2.4 billion, which allowed Government to raise $100 million more than was first intended.

According to Mr. Richards, however, the enthusiasm shown by investors should not be mistaken as an endorsement of the Island's fiscal management.

"The oversubscription took place because the interest rate was unduly high. In other words, it was oversubscribed because Bermuda is paying too much interest. And Bermuda is paying too much interest because they had to, because the reputation of Bermuda in terms of managing its finances has deteriorated."

The 5.6 percent coupon for a sovereign ten-year note was said to be unusually high for the AA-rated bond, the Opposition said. The interest rate means in addition to the money borrowed, Government will be saddled with $28 million in interest payments a year for the next ten years.

HSBC managed the bond issue and yesterday HSBC Bermuda CEO Philip Butterfield said those who said the yield was overly generous were "under-informed" (see Business, page 26).

Mr. Richards said the Finance Ministry had merely "kicked the can down the road for ten years" and that nobody could predict what Bermuda's economic position would be when the debt matures.

He blamed a "laissez-faire culture" at the Finance Ministry, which he said had allowed Government's spending to spiral out of control.

"To me, this is not responsible fiscal management. They haven't attacked the source of the problem. The source of the problem is their inability to live within their means."

He said that a more responsible approach would have been to spread out Government's debts over several years, and not to place it in one lump sum. The current debt scenario, he added, meant Bermuda faced "a very high risk" of refinancing.

In the interim, he said, Government needs to curb spending and adhere to budgets he warned that failure to do so would prove costly.

"If we don't stop the rot now, one day…there will be a day of reckoning. The bond issue that was just floated gives us some information about what the financial markets think of the financial management of Bermuda."