CIG secures $153M loan at 3.25%

| 20/11/2019 | 33 Comments
Cayman News Service

(CNS): Finance Minister Roy McTaggart revealed that Butterfield Bank has won government’s tender for a new loan to partially replace the bond debt that it will pay off in full this Friday. As Finance Committee opened Wednesday, the minister explained the 10-year-old US$312 million bullet bond will be cleared at the end of the week with government’s cash reserves. But to remain compliant with the finance law, government must still re-borrow CI$153 million, which it has secured at a rate of 3.25% over 15 years.

Government gained the necessary approval from the Legislative Assembly to partially refinance this loan in 2017. While the public purse has sufficient cash to cover this due debt, the government would fall foul of its own public finance law if it did not replace a significant portion of the debt.

McTaggart explained that led to the decision to conduct a competitive tender for the re-borrowing of more than half of the loan over a fifteen-year period without any penalties for any early repayment of the principal. He said four financial institutions responded and Butterfield was selected after submitting the best value bid.

The finance minister said, given that the prime lending rate is currently over 4%, the rate of 3.25% offered by the bank demonstrated the confidence the bank has in government. He also emphasised that while government is taking on this new loan, paying off the bullet bond means reducing the overall public debt significantly.


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Category: Government Finance, Politics

Comments (33)

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  1. Jotnar says:

    “The finance minister said, given that the prime lending rate is currently over 4%, the rate of 3.25% offered by the bank demonstrated the confidence the bank has in government”

    So confident that they want more than twice the interest rate that Greece, that bastion of financial integrity and with a track record of sovereign debt default, gets from the market. Comparing the rate a government gets on borrowing ( with an implicit guarantee from the UK government) to Joe Blows mortgage rate and claiming this demonstrates confidence either demonstrates Mr McTaggart is an idiot or that he thinks that members of the public are. As a former senior partner in an accounting firm one rather suspects its the latter.

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    • Anonymous says:

      Inplicit guarantees don’t impress the bond market (assuming there really is an implicit guarantee.) Access to the UK court system is more important. The rate is perfectly good for a tiny territory.

    • Anonymous says:

      You aren’t comparing like for like, a repayment loan will pay roughly half the interest of a bond over it’s life, so whilst Greek debt has a lower headline rate, the overall cost is roughly twice that of a loan. I also left out the different currencices, with the official euro rate at -0.40% and the US rate at 1.50-1.75% range its actually quite a bit better than Greece.

  2. Anonymous says:

    Enough of the double talk Roy. Paying one loan off “in full” by getting another loan is not some great miracle that only a finance “wizard” like yourself can do.

    You simply re-financed.

    Also, Im not sure which law forces you to borrow money. Care to illuminate the matter?

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  3. Anonymous says:

    No!Bracka

  4. Anonymous says:

    The sad part is that the money has already been spent, promised away before the loan was secured. These idiots would most likely sell their own grandmothers if they were offered a few Mil.

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  5. Anonymous says:

    But to remain compliant with the finance law, government must still re-borrow CI$153 million…..what finance law ever requires a government to borrow money? Now a finance law that says they cant afford to repay all of an existing loan because cash reserves would fall to dangerous levels would make sense, but it would be misleading to say the least to say that you could afford to pay all of it and were forced by the law to borrow. Surely Roy wouldn’t try and mislead the taxpayer! 😉

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    • Anonymous says:

      The agreement we reached with the UK is called the Framework for Fiscal Responsibility (usually abbreviated as FFR) and its provisions were put into our Public Management and Finance Laws. That is what they are referring to when they are talking about rules around expenditure and borrowing, they were put in place following the mess that we found ourselves in after the financial crisis

      The rules were put in place here to prevent our finances falling into disarray
      These rules prevent the government of the day from just spending and borrowing frivolously which likely would have been happening if it was not in place

      Its also why it is hilarious that the Minister of Finance and The Premier are now taking credit for the current state of public finances when in actuality they had little say in the matter, the FFR bind their hands

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      • Anonymous says:

        And is one example of why the constitutional changes being advanced are so dangerous. They should be resisted.

      • Anonymous says:

        Among those, the CIG must maintain sufficient reserve liquid capital to handle a few months worth of normal routine public service payroll – something it has struggled to comply with, even after FFR was implemented.

  6. Anonymous says:

    Maybe Butterfield can now help a brother out and stop charging 50 cents per card transaction and bring my mortgage down to a little under highway robbery rates.

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    • Anonymous says:

      The 50 cents is driven by the CI Government debit tax, it’s also largely voluntary, if you spend cash you don’t pay it, except for the initial withdrawal. Doesn’t make sense and is inconvenient, but Government included those transactions in its regulations.

      • Anonymous says:

        Except the stamp duty is 25 cents, not 50 cents. So not sure ‘driven’ is the right term there. But you’re right. The stamp duty was really only seen on cheques (though it applied to all withdrawals) until we all started using debit cards for everything instead, then it became ubiquitous. (I recall one local bank’s early debit cards if tied to your savings account they neglected to charge the fee for a few years until someone cottoned on.) So to minimize it, stick with cash (just don’t go to the ATM every 4 days either).

  7. So why can't government negotiate its own financing for the cruise port? says:

    So why can’t government negotiate its own financing for the cruise port? Verdant Isle will get the best financing for THEM, not for us. Verdant Isle doesn’t care if we have to repay $450 million on a $200 million loan to build the port, but shouldn’t the people of the Cayman Islands care since ultimately we are paying for it? This port project has disaster written all over it!

    Caymanians, are you not seeing the violent protests in Hong Kong? Do you not see the protesting in Chile, where police are permanently blinding protesters by shooting them in the face with rubber bullets? Do you not see what is happening in Venezuela? Are you waiting for it to get so bad here that we have to start our own violent protests to government’s corruption and ineptitude? Vote NO on 19th December and take your damn country back!

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    • Anonymous says:

      The government doesn’t have the cash reserves, and would be hard pressed to borrow anywhere near that amount for a project that would take decades to bring in a profit

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      • So why can't government negotiate its own financing for the cruise port? says:

        So you’re saying that…
        1.government doesn’t have the cash reserves to build the port, and
        2. the government would be “hard pressed” to borrow money for a port project that will take decades to bring a profit.

        So does that not tell you that the government should not build the port? We don’t have the money AND we can’t get our own financing, but we’re going to let a third party borrow money to build it for us, then that party owns the port until their loan is repaid several decades from now. Got it.

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  8. Anonymous says:

    It’s not new – it’s an extension of an existing debt

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  9. Anonymous says:

    the amount paid is in USD the amount borrowed KYD

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  10. Anonymous says:

    Prime is over 5%…

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    • Anonymous says:

      4.75%

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    • Anonymous says:

      One of the banks offered us a bait and switch refinance rate below prime, but the term schedule had the client rate rising steadily into near-credit card levels by midterm, and with substantial fine print early prepayment penalties. They get you sooner or later. This gov’t either doesn’t care or bother to read term sheets, it would seem.

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  11. Kurt Christian says:

    Vote No

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  12. Anonymous says:

    We could be debt free if this ppm/unity government didn’t waste so much money fighting their own people.

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  13. Anonymous says:

    Just weeks ago the Cabinet narrative was “no new borrowing”, whereas bank loans and bonds are, by definition, borrowing instruments. Here it is. Misinformation and deflection continues! Would love to see the terms on this agreement…my guess is it’s a flex rate adjustable loan that will rise with inflation and/or by way of term calendar. Nobody loans money below market rates without some kind of catch.

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    • Anonymous says:

      It’s not new borrowing if it is half of an amount we already owed and is borrowed just to maintain legal compliance. The decision to borrow the money was made many years ago, this is just about how it is paid back.

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      • Anonymous says:

        This is a brand new transaction because PPM/Unity failed to retire a little more than have the face value on the previous 10 year bond note. It is a brand new 15 year loan from a bank, not an extension of the 10 year London issue (which doesn’t happen in the bond market). It’s not a victory lap, it’s a furtherance of their disgrace which the public will now service, at our expense, for another 15 years (a Cayman generation).

    • Anonymous says:

      3:08; this is not new borrowing. Cayman will be debt free in under 5 days. That’s not world class thats Universe Class!!

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      • Anonymous says:

        Crediting the people who got us into unnecessary debt in the first place for paying half of it off is like calling the fire service to your address telling them to pour gasoline in your house and throw a match down, then turning around congratulating them for their speedy response and for putting out the fire

        It was their shoddy fiscal management and wasteful spending that got us in debt in the first place they shouldn’t be credited for mopping up their own mess

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