Cayman Government mulls bond issue

The Cayman Islands Government is considering issuing a 30-year, US$400-million bullet bond in the US capital markets in the second quarter of 2022 to raise funds and refinance existing debt.

The Cayman Ministry of Finance indicates that it is now soliciting bids from independent financial advisors to serve as consultants in the bond-issuance process.

A bullet bond pays its entire principal value on the maturity date, rather than in a series of payments, and cannot be redeemed early by the issuer.

In a December notice, the Government said it would seek to have the bond underwritten by a financial institution and benchmarked against the 30-year US Treasury.

“The purpose of the bond issuance would be to provide for the general financing needs of the Government and possible refinancing of existing public sector debt in the Cayman Islands,” the notice said.

Meanwhile, the Cayman Compass news said that in the two-year budget approved late last year, “the Government projected that it would need to borrow to fund capital expenditure and infrastructure investments but not to pay for its day-to-day operations.

The news site added, “According to the budget, the Government's new borrowings will not exceed CI$299.1 million in 2020 and CI$50 million in 2023. Government's total debt is expected to rise from an estimated $232.1 million in 2021 to $485 million in 2022.”

It was noted that in 2021, the Government paid CI$11.9 million in interest and fees on its existing public sector debt. This is expected to rise to CI$14.9 million in 2022 and almost CI$17 million in 2023.

In an update, it was noted that the Opposition in Cayman is urging the Government to pause before borrowing more.

In a statement, the leader of the Opposition said he was concerned because the “rushed and unexpected” move had not been mentioned at all during the budget debate and in the Finance Committee meetings of Parliament last month.

He argued the bond issue would be expensive and undo the work of previous governments in stabilising government's finances and bringing debt levels down.

It was pointed out that the previously issued US$312-million, 10-year bullet bond had cost the public purse more than US$180 million in interest, whereas the interest cost of a comparable bank loan of the same size would have been US$80 million less.”

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