| Government bond replaces $170 million loan | | Print | |
| Thursday, 28 April 2011 10:29 | |||
 The Turks and Caicos Islands interim government has refinanced a $170 million short-term loan with a bond issue to lock in interest rates to protect against future increases. “Having conducted a detailed refinancing exercise involving a number of international banks over the past six months, the government believes that the new bond is the best option available to give us both low cost debt and, importantly, a fixed interest rate so that we have certainty over our future debt service,” His Excellency the Gov. Gordon Wetherell said April 26. The bonds are payable in full on maturity on Feb. 22, 2016, with a fixed interest rate of 3.2 percent. The government used RBC Capital Markets and Scotia Capital to manage the bond issue, which was priced on April 18 and settled on April 26. In March the interim government put in place a $260 million loan package guaranteed by the U.K. Department for International Development to pay off the country’s massive debts and cover future projected budget deficits. Most of the government debt was incurred by the former elected government by what the governor has called fiscal maladministration, compounded by the economic downturn. A condition of the loan package is that the government achieve a surplus by the fiscal year ending March 2013. As part of the $260 million package, a $170 million was borrowed short-term at an interest rate of .25 percent over the London Interbank Offered Rate (LIBOR), the daily reference rate based on rates at which banks borrow in the interbank lending market. Most of that will repay a consolidated loan that was at 5 percent above LIBOR and to pay a large backlog of unpaid non-financial creditors, the governor said. The refinancing of the $170 loan does not affect other parts of the $260 million package. Those are a five-year term loan of $30 million at .75 percent over LIBOR to repay more expensive government debts, and a five-year revolving bank facility of $60 million at .25 percent over LIBOR to fund projected deficits over the next two years.
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