“In effect, in layman’s terms, it’s a two-year loan with Goldman Sachs that we just took out”
NASSAU, BAHAMAS — Economic Affairs Minister Michael Halkitis said yesterday that the government has effectively taken out a short-term loan with Goldman Sachs International via a repurchase agreement (repo) as conditions in the bond market are “not ideal” at this time.
The Ministry of Finance said in a statement yesterday that under the terms of the agreement, the government sold and transferred to Goldman Sachs International (GSI) US $235,916,000 nominal amount of United States treasuries in consideration for a purchase price of US $206,458,850.71 from GSI.
Halkitis yesterday explained that the transaction was not unusual.
“A repo agreement is basically a short-term loan whereby one financial entity agrees to purchase securities you have and simultaneously you agree to purchase it back from them over a period of time,” he said.
“We agreed to purchase it back in two years.
“In effect, in layman’s terms, it’s a two-year loan with Goldman Sachs that we just took out.
“We don’t think the conditions to go to the open bond market are ideal at this time, given what’s going on in the world, and this is the method we use.
“It’s totally normal and used by countries all around the world. Repo agreements are done all the time. There’s nothing special about it.”
The Ministry of Finance, in its statement, noted: “It is intended that the purchase price received by the government from GSI will be used by the government for general budgetary purposes during the 2021/22 fiscal year.
“The designated treasuries are part of the sinking funds managed by the Central Bank of The Bahamas on behalf of the government.
“During the term of the repo, subject to the government complying with its obligations under the repo, GSI is required to transfer to the government amounts equal to any interest payments received on the treasuries.
“On the scheduled repurchase date for the repo — 24 months from the purchase date — GSI is required to sell and transfer the treasuries, or equivalent assets, back to the government against payment by the government of the repurchase price of US $206,458,850.71.”
