Cayman bond yields 5.95%

| 19/11/2009

(CNS): The Cayman Islands government appears to have secured a good deal on the open markets to re-finance its debt. The launch of a $312 million, 10-year bond offer today, Thursday 19 November, has, according to reports, yielded 5.95%. The yield on the notes, which will be listed in The Cayman Islands and London, came in tighter than the guidance given on Wednesday of 6% to 6.125%. HSBC is the sole book-runner on the deal and CNS understands that the issue was oversubscribed and is the tightest deal that a Caribbean country has ever achieved. The debt was a combination of various government borrowings that were due to be paid at the end of this year.

The announcement of government’s intention to issue the bond was made in the Legislative Assembly yesterday by Premier McKeeva Bush when he brought a motion to facilitate the issue. He said government had made the decision to issue the bond on the open markets because of the size of the debt and based on advice that suggested the CIG would be likely to get a wider reach and a better interest rate, which turned out to be the case.

Bush said at the time that he could not elaborate on the details as the terms had not been set and the government would not know the final terms until the bond was issued.

According to the final term sheet, the bond interest will be payable semi-annually in arrears in May and November the first interest payment will be due on 24 May 2010.  The issue which is Cayman’s first international sale of government bonds has reportedly been taken up by a wide distribution of buyers from North America, Europe, Asia and the Middle East.

On Friday morning a release from the ministry of finance confirmed the yeild and said that the Notes have not been registered under the U.S. Securities Act, as amended, (the “U.S. Securities Act”) and unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the US. Securities Act and other applicable securities laws.

The offer comes on the heels of other offers from the Caribbean and Central America this week. The Bahamas raised $300 million through a 20-year bond yielding 7%, while Panama priced $1 billion in 10-year notes with a 5.224% yield. According to reports on Bloomberg, a number of governments from the emerging markets have been or are planning first-time debt offerings to take advantage of what it described as the biggest bond rally in at least 11 years.

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  1. Anonymous says:

    Panama can issue a 10 year note at a lower rate partially because the size of their bond is larger which makes the instrument more liquid (easily traded) and therefore more attractive For e.g. bond investors tend to prefer issues at 500 mil or more). Panama is also a very active issuer in the bond market which helps as compared to cayman which has come to the public market for the very first time. re ratings…truth is cayman actually has a higher country rating than panama but the rating is only one factor. impacting the rate…overall this is actually a very good result for cayman under the circumstances.

  2. Anonymous says:

    re ‘this is not good news’ below…these funds are not being used to refinance the boatswain’s beach bond.

    In addition you should reconsider trying to compare a facility of over 4% several years go to one now when market conditions (world conditions) are very different. 

  3. Anonymous says:

    All this does is create liabilities (long-term) for future generations to worry about. How about some creative thinking for a change guys ?


  4. Anonymous says:

    Panama is rated better because it is a real country.

  5. Anonymous says:

    If you haven’t heard, Panama controls a canal that is of critical importance to global trade, ie. they have a well-established revenue model.  That’s how.

    Frankly we are lucky that Cayman government could source capital at less than junk rates.  Thank goodness the paper is backstopped by the full faith and credit of the FCO, ie UK. 





  6. Apples and pears says:

    It would have been better to cut civil service spending so we did not have to borrow so much.

  7. Anonymous says:

    Congratulations, and why was’nt this done before by the now opposition?

  8. Anonymous says:

    This is NOT good news. In 2003 McKeeva issued a bond for $44.6 million to build Boatswain’s Beach. Despite the fact that $2.85 million went to XXXXXXX the people who "assist" in securing financing, the payment terms on that bond was 4.85% over 15 years.

    You can read the details here:

    If we are now issuing a bond for $300 million at 5.95% to pay off a loan that was only costing us 4.85% then we have just started out on a slippery road.

  9. Anonymous says:

    Kudos Mac!!! unfortunately  it is time for the PPM’er s to tear this one apart,,,Here they come!!!

  10. anonymouse says:

    I’m pretty sure the Cayman Islands issued a $200 mio dollar bond a while back, maybe 2003, yield is 5.30% and has a 2018 maturity.  The bond was alsosold overseas – not sure where the blurb on this one was generated?

  11. Anonymous says:

    Hip Hip!!!

  12. bradley says:

    Good job!

    A 10-year bond has yielded for us 5.95% in order to pay off $312 million dollars – the tightest deal a Caribbean country has ever achieved! 
    This is good news indeed!  At least, the FCO will witness at the end of the year, how we will rightfully deal with our lenders.
    Continue your prayers for the UDP and the Opposition – As Caymanians, we are all in this together!
    • Anon says:

      "A 10-year bond has yielded for us 5.95%"

      Just so we’re clear, it will not have "yielded for us" this rate – when a government issues a bond it PAYS interest to the bondholder.  That said, the lower rate is good because it costs us less. 

      I just wonder why Panama manages to issue a 10 year note at only 5.225%  Why are they better rated than us, one might ask?

      • frank rizzo says:

        Panama is probably seen as having less repayment risk.

        "Panama’s dollarized economy rests primarily on a well-developed services sector that accounts for 80% of GDP. Services include operating the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism. Economic growth will be bolstered by the Panama Canal expansion project that began in 2007 and is scheduled to be completed by 2014 at a cost of $5.3 billion – about 25% of current GDP. The expansion project will more than double the Canal’s capacity, enabling it to accommodate ships that are now too large to transverse the transoceanic crossway, and should help to reduce the high unemployment rate. Strong economic performance has reduced the national poverty level to 29% in 2008; however, Panama has the second most unequal income distribution in Latin America. The government has implemented tax reforms, as well as social security reforms, and backs regional trade agreements and development of tourism. Not a CAFTA signatory, Panama in December 2006 independently negotiated a free trade agreement with the US, which, when implemented, will help promote the country’s economic growth."