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US$550 million bond ‘left money on the table’

Thursday, December 19, 2013

Two well-respected analysts of Caribbean debt issues have suggested that last week's issue by Government of a US$550 million bond on the international capital market was mispriced and that the country could have borrowed at significantly lower interest rates.


Minister of Finance Larry Howai led a roadshow to Los Angeles, New York and Boston earlier this month to drum up interest by international institutional investors in a US$500 million, 10-year bond to be issued by Government, in its first foray into the international capital market since 2007.


Citibank served as the Government advisors on the bond issue.


The US$500 million bond was priced at 4.375 per cent last week Wednesday and received very strong demand from international investors, attracting bids of close to US$5 billion, according to a statement from the Ministry of Finance on Thursday last.


The strong demand at 4.375 per cent allowed the Government to increase the offer by US$50 million to US$550 million and “tighten the interest rate by 0.375 per cent from the initial rate of 4.75 per cent.”


But even the rate of 4.375 per cent on the US$550 million bond was described by Jason Julien, the general manager at First Citizens Investment Services, as being “very generous” and “a significant premium” when compared to the TT-government, US dollar yield curve.


Julien pointed out that Government's previously issued bond, which is due to mature in 2021, was trading at 2.33 per cent on Friday, while a 20-year bond that matures in 2027 traded at 3.96 per cent.





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