01 September 2015

Guam lowers its debt payments through lower interest bonds

Press Release
Office of the Governor

Guam lowered its debt, moving $412.5 million of loans issued in 2007 and 2009 from low-rated general obligation bonds to A-rated BPT bonds. The interest rate dropped from approximately 6.42% (7.28% for the 2009 GO and 5.56% 2007 GO) to the lowest rate for long-term bonds GovGuam has ever been assigned: 4.02%.

That lower rate ends up saving taxpayers $45.3M in debt payments. Guam saves $1.975M as soon as the sale is final.

Economies throughout the world are faltering or struggling. However, Guam’s business privilege tax collections have been strong and are steadily growing. Not only does that show investors in our bonds that GovGuam is relying on a good repayment source for our debts, it also is indicative of continuous growth in our economy.

Investors had so much confidence in the Calvo administration’s handling of finances and the state of the Guam economy that they made of $1 billion in orders for $412.5M in Guam bonds. This confidence in the BPT from the financial markets is in stark contrast to the Guam Legislature’s stance on the BPT, which is what led 13 senators to under-fund several agencies and critical services.

The Series D Bonds were sold in an extremely challenging market characterized by extreme volatility in both equity and debt markets. The stock market fluctuated wildly during the week, sparked by concerns over growth in China, while Treasury bond yields rose 12 basis points during the day of pricing. It was also a busy Municipal Bonds selling calendar with Guam’s BPT Bonds being offered alongside the California’s $2 billion GO Bonds and the state of New Jersey’s $2.2 billion Appropriation Bonds.

The BPT Series 2015D Bonds refunded all of the 2007 General Obligation (GO) Bonds and all of the callable 2009 GO Bonds. The BPT Bonds were rated ‘A’ by Standard and Poor’s and ‘A-‘ by Fitch Ratings, both with a stable outlook.

“This outstanding performance in a very difficult and busy bond market is yet another reflection of how this administration’s fiscal policies are helping to stabilize the overall financial health of the government,” Governor Eddie Baza Calvo said. “Had we received legislative approval back when the bill was originally introduced in April, the Government could have achieved even more savings. I thank my team for successfully moving forward despite all these hurdles.”

The BPT Series 2015 D Bonds are expected to close next Thursday.

The legislature authorized the 2007 General Obligation (GO) Bonds to pay for capital improvement projects at the Guam Memorial Hospital and other health care needs. The 2009 GO Bonds paid for Tax refunds, COLA settlement agreement, GMHA CIPs and past due retirement fund contributions on behalf of GMHA and GDOE. These bonds were issued years before Governor Calvo became the governor.

Taxpayers were paying a much higher interest rate on these bonds because of the financial crisis and huge deficits of those days.

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Cayman should demand to have World Organisation membership

The Cayman Reporter

Today the Cayman Islands face many challenges especially when it pertains to its financial services industry. Although a small nation, the Cayman Islands has become accustomed to manoeuvring around the global financial arena and dealing with various threats such as being placed on financial blacklists

It would be beyond the scope of this editorial to even try and project the growing demand amongst the OECD and the EU to force Overseas Territories (OT) such as the Cayman Islands to forcefully comply with the transparency requirements that suit the economic and financial needs of their economies, regardless of the detrimental impact on the financial industry of the Cayman Islands.

Interestingly, many in our community are not aware that during 1991 to 1995 the British Overseas Territories (BOT) were consulted by the United Kingdom when its World Trade Organisation (WTO) membership was being negotiated as to whether the OTs wished to be covered. The OTs chose not to be and therefore are not represented in WTO talks. Basically the Cayman Islands, as one of the BOTs gave the UK the right to decide our financial services industry laws and future.

Overseas Territories use to benefit from preferential market access arrangements to the EU through the Generalised System of Preferences (GSP) or the Overseas Association Decision (OAD). Under current Commission proposals, Overseas Territories, with effect from 1 January 2014, no longer are eligible for the preferences under the GSP.”

Whatever the reason may have been for OTs agreeing to give all their negotiating powers to the mother country during the 90s, one thing has become quite clear. OTs such as the Cayman Islands have changed significantly over the past 20 years and should be seeking to be at the negotiating table to ensure that the Cayman Islands interests are considered and acted on.

In recent years we have seen too many incidents whereby it is apparent that the UK’s interests take precedence over the interest of the people in the Cayman Islands. How can we as a country be assured that the UK has been appropriately representing our interests in the international arena? Far too often we see our financial services industry coming under attack but rarely do we see the UK coming to our defence when the likes of the US come down on us.

Our constitution also makes it clear that the UK’s interest very well may come before ours. In ‘The Cayman Islands Constitution Order 2009’ section 31(3) it states, “In the exercise of his or her functions under subsection (2), the Governor shall endeavour to promote good governance and to act in the best interests of the Cayman Islands so far as such interests are consistent with the interests of the United Kingdom.” The final part of this clause makes it clear that the Governor, who should be acting in the best interest of the Cayman Islands, can refrain from doing so if Cayman’s interests are not aligned with that of the UK.

Maybe it is about time our government begin discussions on gaining back control over certain decision making abilities related to international trade and commerce, such as the ability to be represented at the WTO. If we cannot be assured that the UK will be looking out for the Cayman Islands best interest. It would be in our best interest to begin to take control of important aspects of our economy and country, especially when it pertains to international trade.