Latest loan rate under wraps

| 22/02/2011

(CNS): Although a deal with Cohen & Company to arrange government’s loan of US$185M has fallen through, the New York based firm did organize two bridging loans for public coffers of more than US$128M. A spokesperson for the finance ministry said he could not reveal the interest rate or the fees paid to Cohen on these stop-gap loans as government was still exploring the long term loan with other financial institutions and didn’t want to undermine that process. He said the details would become public, however, when the long term deal was secured. Government borrowed US$92.5M via Cohen last year over a 2-3 month term, which has now been extended to April of this year, and a second US$36M loan which it has now paid back.

The ministry said that the interest rates were competitive, despite being short term, and the money came from a number of different financial institutions, including a local bank. Cohen did not lend government the cash but sourced the short term loans with various banks, the ministry confirmed.

The proposed long term financing deal which government had entered into with Cohen would have been a bond issue. However, the country’s premier recently announced that the deal had fallen through as the firm could not guarantee the original favourable interest rate it had said it could secure.

Government faced considerable criticisms as a result of its decision to enter into a deal with Cohen last October as it had circumvented the central tendering process. At the time the premier said he had done so to get better value for the public purse and chosen “substance over process”. Now the deal has fallen through it is not known how much government has paid in fees to the firm for these two loans, what rates were secured and what further fees it will now pay to organise other loans or bond issues as well as future interest rates.

These two loans were temporary financing arrangements which have to be paid back over a specific short time frame to address government cash flow issues until a long term loan is organized. Although the UK has cleared the government to borrow up to US$185 million (CI$155M) in this financial year, the premier recently stated that with a turn around in public finances from an anticipated deficit to a surplus as a result of a cut in government’s operating costs, it may not need the full amount.

However, if later in the year the government finds there is still a deficit and it did not borrow the full approved amount, the UK may not allow the Cayman government to carry that approval over into the 2011/12 financial year and borrow the difference after 30 June 2011.

Although the exact amount is yet to be decided, government does need to borrow money to both pay back the short term loan arranged by Cohen and to cover the originally expected shortfall in government operational revenue this financial year. It is not yet been decided whether government will re- tender for the loan or follow a selective tendering process based on the information it received during the original tendering process when locally based company had reportedly offered a rate as low as 3.5%.

Government currently has an a estimated total public debt of about CI$550million divided over two separate bond issues, which were floated in 2003 and 2009, a collection of loans with a local retail bank and this more recent temporary loan which was arranged via Cohen & Co.

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Comments (15)

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  1. Anonymous says:

    the country is being run into the ground and the Premier is being allowed to do whatever he likes while the voting public do nothing to reign him. as one who has no power to vote, I wonder what those who do think is within their power to make a change/ impact.

  2. whodatis says:

    I don’t see what all the fuss is about …

    Are we not a British Overseas Territory?

    The way I see it we are simply following their stellar example of how to govern, manage and finance a country. (Confused? Just do a quick probe into the ACTUAL financial standing of that country; economy, unemployment, social services a.k.a. ‘benefits’ etc.)

    Hopefully Cayman manages to see the light and rein in the situation before things get way out of control.

    • Man Wednesday says:

      For Gawd in Heaven’s sake, whodatis, stick to the Chagos Islanders and that fascist FCO blimp chappie you like to rabbit on about from time to time. At least you can cut and paste that stuff from Wikipedia.When you stray from that, you reveal troubling deficiencies.

  3. nauticalone says:

    Another fine mess by the Premier!

    Advice: Just follow the Process….and the Law.
    Same are there for good reason!

    The amount of limited resources CIG spends on damage control (to little affect) is a shame….and so unneccessary!

  4. Anonymous says:

    Why borrow money if you have a surplus of 17m ?

    • Anonymous says:

      That’s where the surplus came from. He borrowed $128M so that he could say he had $17M more than he needed. lol.

  5. Anonymous says:

    i don’t think anybody knows whats going on with the gov finances…..the story changes every day…..
    and doesn’t help when we don’t seem to have people in the media who seem unable or unwilling to get to the bottom of it….

  6. Anonymous says:

    Get worried Cyman!
    Remember, this arrangement was made by your premier, he didnt go through the proper channels, he hasnt told you what is being paid and to who, and by the time the auditor is allowed anywhere near the facts, he may have changed the auditor!
    Not suggesting there is anything untoward in all the above, but if a politician allows questionable circumstances to exist, isnt it right that you ask the questions?

  7. Anonymous says:

    This is the typical lack of transparency that we have come to expect from these wheeler-dealers.
    The sooner we get rid of these clowns, the better. I hope we don’t replace them with another bunch.

    Stop dragging this country into debt! The fact that we are in debt shows that you are not fit to be captain of the ship.

  8. Merchant Banker says:

    Who is the Minister of Finance?  Why is the Premier not getting him to come clean?

    So what they are really saying is that the rates they got on these deals were very poor.  If they had obtained good rates then they would have announced them and used them to help future loan negotiations.

    I suspect this explanation can have little accuracy at all since any new lender would want to know the rates and terms of recent funding arrangements as part of due dilligence.  They certainly will now after this announcement!

     

  9. Anonymous says:

    And isn’t it amazing how many people fail, or refuse to see the real truth?  No wonder they were against Alden’s strive to better educate the population, because an illerate public, dependent on Social Services, adores the leader who sends them for easy handouts.

  10. Michel Lemay says:

    The interest on the loan would be nice to know. Another surprise ? And when we thougt that Cohen and Cohen eas a thing of the past. This is a ct and mouse game. We are the MOUSE.

  11. Thinking before speaking... says:

    Is anyone else experiencing a sinking feeling in the pit of the stomach caused by (whether by design or disaster) some individual(s) continually choosing substance over process and by so doing virtually single-handedly  destroying Cayman’s credibility in the international world of finance?  What can we do to reverse this or Is it already too late to stop this fast downward slide into oblivion?

  12. Anonymous says:

    All hail McDinejad. If the Wise Men came from the East, then it is only fitting that he would have come from West bay.

    You know that you’re in a banana republic when the Minister of Finance pays a company in New York to secure a loan from one of your local banks for you.

    • Anonymous says:

      LOL! So, we had to go all the way to NY to find a facilitator in order to speak to one of our local banks – das kickb.., I mean LEADERSHIP!!!