Gov’t not cutting loan to replace bond

| 17/09/2019 | 54 Comments
Cayman News Service

(CNS): Government is seeking bids from local banks for a loan of CI$153 million to plug a hole that will be created in its cash flow after it pays off a CI$261 million bullet bond due in November. During the scrutiny of the 2018/2019 budget the finance ministry received approval from the Legislative Assembly to borrow the cash ahead of the bond pay-off. But given the health of the public purse, Financial Secretary Kenneth Jefferson told CNS last month that government may not borrow the full amount approved.

However, despite the significant surpluses government has accumulated over the last few budgets, it is now seeking a loan for the CI$153 million from local institutions that it will pay off over fifteen years through both principal and interest payments.

CNS has asked the ministry what led to the decision to borrow the full amount approved by the LA, when just last month the government revealed that it had a $200 million surplus at the half-way point for the year, and we are awaiting a response.

While the second half of the year is less lucrative for government earnings, with $80 million more collected than it expected, the public purse remains on track for another significant surplus at the end of 2019 and could have easily cut the loan amount, protecting the Cayman Islands Treasury from a potential global recession that economic pundits are increasingly warning about.

According to the request for proposal documents, government is looking for a local bank that can provide the full amount in two even payments, to be drawn down in November and December this year, though is also states that it reserves the right to drawn down less or to take the money over a longer period. The RFP states that government is seeking terms that will also allow it to pay the unsecured loan off early without incurring a penalty.

It is also asking the bidding institutions for a fixed interest rate over the loan period and said it will not accept any interest rate increase. The government has indicated that 80% of the weight given to considerations of bids will be based on that interest rate.

Overall, government has made steady progress in the last few years paying off what was once a significant debt. At its peak in 2010/11, the public debt stood at almost $800 million. Running up the borrowing bill was one of the fundamental reasons why the government at the time failed to comply with the Public Management and Finance Law and was banned for borrowing any more money by the UK.

However, governments has not added to the debt pile since its last borrowing in 2011 and has been paying off the money it owes at a steady rate. By the end of June this year, the public debt balance stood at $407.1 million.

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Category: Government Finance, Politics

Comments (54)

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  1. Anonymous says:

    The ever-savvy CIG is $153mln short on the imminent maturity of London Intl 10year (that they’ve had 10 years to prepare and budget for), and are only now emergency shopping for new terms on what they hope will be a 15yr loan, and they are shopping that $153mln face to our local retail consumer banks with a Nov deadline!?! Forget savvy, this isn’t even prudent problem solving.

    • Anon. says:

      You don’t understand accrual accounting and the article was a bit misleading so you are excused.

  2. Anonymous says:

    There is no surplus, and what little we can see of our unaudited finances are not under control. We have half a billion in declared debt plus another billion plus in undeclared pension and healthcare liabilities. After 10 years of knowing about this fixed deadline, this gov’t still can’t fully retire the principal from the last loan, and they haven’t finsihed John Grey, built mental health center, nor do they have money for all the roads they’d promised.

    • Anonymous says:

      In a nutshell, “government: we have a debit of xyz, but we want a loan to show we have abc” I think that says it all.

      What happen to the “we we will have a surplus”…a surplus is not to borrow money to put in the bank to show you have a “surplus”

    • Anonymous says:

      I am so proud of our Government. This is a World Class achievement. In fact Cayman is the envy of the world. Just look at the number of professionals coming to Cayman from UK USA and Canada. They come and can’t bear the thought of leaving.

  3. Anonymous says:

    For those of us in the private sector busting our asses year upon year to feed ourselves and the behemoth government that we serve, this place is a disgrace.
    I have no money to grease the palm of the Lodge and even if I did, I wouldn’t.
    To all the politicians in Cayman, screw you all.
    Our government is broken and corrupt. I expect nothing from you. You have done nothing to help the common man.

  4. Anonymous says:

    Collect the money Michael Ryan owes the government, stop the waiving of duties and fees DART, Cayman Enterprise City and other developers do not pay then we would have an overabundance of funds.

    These people are too buddy buddy with our MLAs.

    We have no corporate or personal taxes, that in itself is an incentivised reason to do business in the Cayman Islands.

    Time long past to withdraw the Hotel Aids Law.

    • Anonymous says:

      Ahem – that would be the Hotels Aid Law!

    • SSM345 says:

      DART owns the Ritz, you might have missed that, Ryan no longer owes anything as it was taken of in the acquisition…..

      • Anonymous says:

        Dart habitually acquires distressed assets that come bundled with liabilities, and then gaslights naive bureaucrats/pre-existing residents into thinking the pre-existing liabilities no longer exist. They do. It’s reflected in the acquisition price.

      • David says:

        The hotel didn’t go bust. When the Ritz was taken over the first payment should have gone to the government. You can’t avoid taxes by just moving assets into a new company.

        Why didn’t the government want to collect from Michael Ryan?

  5. Anonymous says:

    If ALL developers were paying their way then during the out of control development since 2009 government would have collected hundreds of $$$$ millions in fees and taxes. This would have allowed for all debts to be paid and establish a Sovereign Wealth Fund, like has been done in a few well administered countries with good governance.

    Instead what has occurred in the Cayman Islands is vast subsidies has been paid, yes a fee / tax not collected is a subsidy, to BILLIONAIRE DEVELOPERS. This is Corporate Welfare, just like NAU is personal welfare.

    Also if ALL of these fees / taxes had been collected then teachers would have received the promised salary increase, schools would have been completed, etc., etc.

    However these things are important to Caymanians, but government does what is important to their money master friends, because the know they can buy hungry Caymanian votes with a chicken at Christmas and a school bag in the summer.

    Why pay a decent wage when keeping people poor they are easier to control.

  6. Anonymous says:

    Well done to the Minister of Finance Roy McTaggart and the previous Minister Marco Archer who got us back on track. Ask yourself where else in the world in paying off debt like this – in mosts countries they are increasing their debt.

    • Anonymous says:

      God Bless up our great MLA’s.

    • Anonymous says:

      Wow! You are super easy to fool. Or is it the free gas?

    • Anonymous says:

      By opening doors to unrestricted immigration for sake of surplus driven by record breaking work permit and permanent residency fees…destroying the opportunities for Caymanians in their own country…making the visitor the entitled and giving away the country. Yeah great work and forsight boys.

  7. Anonymous says:

    Could this have anything to do with the Cruiseship Berth?????

  8. Anonymous says:

    Typical Mckeeva Bush policies at work kick the can down the road just a little longer.

  9. Anonymous says:

    I might not be allowed to say this but I feel like there was a period around when the UK stepped in that there was rampant corruption at the highest levels of our government. I think the surplus is the result of getting that under control.

  10. Anonymous says:

    *sips tea loudly*

  11. Anonymous says:

    This gov’t isn’t sophisticated enough to go to the international bond market. Instead, with just a month to go on a ten year fuse, they now seek bidders on a revolving line of credit with “local banks” (no longer owned by locals), at floating market loan rates. To be clear, this IS an adjustable loan that they are seeking. Meanwhile, there is one vulture private office that hovers in the wings ready to cut a deal to take it all down.

    • Anon says:

      Can’t Alden prevail on McKeeva to tap his financial contacts in New York that can apparently lend below market rates?.

  12. Anonymous says:

    If you are worried about global recession, it makes sense to hang on to your surplus and refinance a good bit of this long term debt at the current favorable rates. Having no debt but also no cash is no protection at all.

    • Anonymous says:

      It makes sense to refinance long term at todays rates, not on a revolving/short term basis. If it all hits the fan again, short term funding will disappear.

      • Anonymous says:

        London Int’l Bond market would have been better idea, pre-Brexit, while Cayman still has UK backstop (that still seems to still mean something), and with the Fed cutting another 25bpts. We might even be able to eek a 15yr USD bond around 5.5% again. What local banks are they talking about? There aren’t any.

  13. Anonymous says:

    Yes what did happen to that $200 million surplus.

    • Anon says:

      11.11am They spent it on new garbage trucks.

      • Anonymous says:

        Not enough trucks, there is still a lot of trash in the CIG to be cleared out. Especially that 4 year one.

        • Anonymous says:

          to 4.01 Just FYI we would rather recycle our own local trash every four years , than have to deal with any of that foreign trash that someone wants to put on top of the heap.

          • Anonymous says:

            Just imagine the pompous, vindictive, prejudiced expats that would run and get elected in say George Town North. They’d be worse than John Bercow. We’d have a civil war with Americans, Brits, Canadians, Europeans, Aussies and Kiwis vs Caymanians vs Jamaicans, Filipinos, Hondurans, etc. All out war. We must never let that happen.

    • Anonymous says:

      The government is spending it by paying expensive QCs on both sides of the fight against gay marriage

  14. Anonymous says:

    So the government is running on a surplus beyond magnitude of need, with the civil service employees driving lines of 40k Toyota trucks with all the bells and whistles, full package and full ride medical and pension but we as the citizens of Cayman who don’t work for the government is living day to day and paycheck to paycheck because of the astronomical cost of living in this country, I really wonders sometimes why we keep these people in power, it is time to cut some of these unnecessary cost.

    • Anonymous says:

      There are plenty of civil servants working paycheck to paycheck. Not everyone is making the salary of a director of a department. And many of those people driving around in $50k are in debt up to their eyeballs. Maybe you should be asking why anyone living in this country of such vast wealth is struggling to cover a basic rent, buy groceries, pay for childcare.

      • Anon says:

        12.50pm that would be true if there weren’t so many Directors of so many departments each with Deputy Directors , Chief Officers etc etc all taking a big slice of the pie, not to mention all those on seemingly permanent suspension on full pay.

    • Anonymous says:

      Government employees are living paycheck to paycheck too…..

      • Anonymous says:

        Yes, I can imagine that, but it depends on which echelon you are in and whether you are a member of the lodge. You have my sympathies.

        I pray for the Almighty hand of judgement to fall on these islands and in the removal of the unrighteous, let the humble men/women be left behind to rebuild their country in a simple and honest way.

        When you take an oath of service to your country and you have dishonestly sworn a secret oath that supercedes your public oath, how can you escape the damnation of hell? How?

    • Bean Counter says:

      Never forget the $1.8 BILLION in unfunded health and pension liabilities for government civil servants. The surplus was never real neither are the voodoo economic principles or results expounded by the ppm lead unity government.

    • Anonymous says:

      I think the first part of your problem is writing like “I really wonders”

      But I still love ya bobo

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