NASSAU, BAHAMAS — With a “stronger sales pitch” The Bahamas may have been able to attain a better rate on its recent international bond offering, a well-known banker has opined.
The Ministry of Finance confirmed on Monday that the government had been able to secure US$600 million in bond financing from international capital markets to help finance its 2020/2021 budgetary needs and repay debt.
The interest coupon of 8.95 percent was attached to the $600 million issue.
Gowon Bowe, the Fidelity Group’s chief executive told Eyewitness News that he thinks the government could have gotten a better rate.
“It would not have been easy to do because it would have required a stronger sales pitch, meaning that we would need to have presented what was going to be the best-case scenario in a very detailed plan,” he said.
“I just don’t believe we have that type of holistic debt management plan which would have served us well. We are moving towards it with the Debt Management Bill but we would have benefited from that already being in place. I would like to know if the government considered different terms to keep the interest rate down. I don’t think the interest is way off where it could be but I would have personally liked to have seen it under eight percent.”
Bowe said: “I believe that with a detailed comprehensive plan we have the ability to do a bit better. That’s only an assumption. If they put together everything I would have if and we still got 8.95 percent then so be it but I just have not seen a detailed debt management strategy to allow me to be satisfied that we put forward our best case. I think we put forward a good case just reading the tea leaves.
“I believe we have yet to draft the best story and if we have not yet drafted it we haven’t pitched it.”
Bowe acknowledged that the interest rate that Bahamian taxpayers will have to service compared is much higher than what to what the government would likely have been required to pay prior to COVID-19 and credit rating downgrades.
“There is an increased credit risk premium and therefore when they look at market indicators the markets are demanding somewhere north of 8 percent,” he said.
Speaking to the issue ahead of a Cabinet meeting yesterday, Deputy Prime Minister K Peter Turnquest said the $US 600 million represents the “largest chunk” of financing under the $1.334 billion in approved financing for the current fiscal year.
“This is our largest chunk of financing under our borrowing authority that Parliament granted us In June,” he said.
“We are satisfied with the level of interest in our debt paper well over $1.1 billion of interest. I know there is concern about the interest rate. We will talk about that in greater detail. I know there is also concern about why international versus domestic. We will also talk about that at a later point to explain to the Bahamian people what we are trying to achieve,” said Turnquest.
“We must realize that we are a tourism-based economy and we have suffered a significant blow to our number one revenue earner. In addition, we have just come out of Hurricane Dorian and we have had a rating downgrade. We would like to see a better rate but we live in the real world and we have some challenges.
“We are working through them,” Turnquest said.
He noted that government has over $400 million in borrowing it plans to source from the domestic market, adding that the government has no concern over its ability to raise those funds.
Turnquest acknowledged that the government is “concerned and anxious” over restarting the tourism sector as quickly as possible.