The little snippet that leached out about HSBC commencing a “non-deal roadshow”(*) concerned with Bermuda’s debt leads to a question linked to the currently hot issue of press freedom, a Bermudian’s ‘right to know’ and Government transparency.
Bermuda’s national debt is a debt every Bermudian shares and is ultimately responsible for.
A Bermudian baby who squalls into life at 10:59am on a Monday owes a part of that debt as of 10:59am and one second.
He/she owes a part even though he/she is unnamed, not Christened and obviously not employed.
That debt is still owed.
Every Bermudian pays some kind of tax to the Bermuda Government.
Every Bermudian pays into the sinking fund.
Every Bermudian pays a part of the annual interest costs of Bermuda’s national debt.
Non-Bermudians are temporary residents in Bermuda. They share in some of the payments of debt interest and contribute to the sinking fund.
But when they fly away, they also fly away from this obligation. Us lot are stuck until death with that debt.
Every Bermudian should be kept fully informed of any financial dealings the Government undertakes that results in any increase in national debt levels.
Whenever Government is about to undertake or make a long-term, or even short term, major financial commitment, the taxpayer should be kept fully informed because he and she are the ultimate owners of that commitment.
The chart shows the build-up of Bermuda’s national debt.
All the figures are from Government financial or Budget statements.
The chart shows conclusively that Government must ultimately borrow a net $759,000,000 (**).
Yet no one in Government has even suggested the public be told or has taken the time to tell the 50,000 tax-paying Bermudians who have to pay back that loan. This is financial management by the back door. This is financial management in the dark.
This is financial management under the bedsheets.
It is not open financial management. It is not the kind of financial management appropriate in a country billing itself as advanced, open and well managed.
The Bermudian taxpaying public should be kept fully informed on all matters involving their taxes and any tax-paying obligations that will be laid on them and their children and grandchildren. To do so is good and open Government.
Not to do so is bad governance and points to bad management styles and bad management methods.
Get things right. Be honest.
(*) “Non-deal roadshow. Underwriting banks or broker holds a series of meetings with potential investors. At the meetings, the instruments (bonds or notes) of Bermuda debt would be introduced and explained. Investors receive all the information they require in order for them to make their decision.
This ‘non-deal roadshow’ is organized by HSBC. The road show was reported to start in Hong Kong on Monday May 17, then move to Singapore, Los Angeles, Boston and end next week in New York. Investor decisions could be expected to be known by June 4 and the whole deal could be fully consummated by June 11.
Government figures show a $200,000,000 loan facility that must be paid back or rolled over (converted into a similar new obligation) by Thursday June 17, 2010.
(**) To receive $759 million, the bond or note issue will likely total $775 million. The $16million difference, about two per cent overall, represents underwriting agency commissions and fees. It seems HSBC is the underwriter. In normal business transactions, underwriters are paid. Bermudians will pay interest on $775,000,000. So Bermuda’s real national debt level will rise further and settle $16million higher at $1,117,454,000. If the $200 million loan facility is rolled over, the bond issue could drop to $570million. In that case, Bermuda’s real national debt would then resettle at $1,112,454,000.
Notes and explanations:
The total debt that must be covered by long-term loans or other long-term obligations is the total debt less guarantees. on February 26, 2010, this amount was reported in the Budget statement at an adjusted $415 million. Some of this $415 million was covered by large short term overdraft facilities.
In the February Budget statement, total debt as at March 31, 2010, was reported as $989.8 million.
The Budget statement projected additional borrowings in fiscal year 2010/11, showing a total debt of $1,101.5 million by March 31, 2011. This amount is after paying off or rolling over the $200 million loan facility due on June 17, 2010.
The total to be covered is the total debt less Guarantees. If the Guarantees must be made good, then the total amount borrowed will have to be increased by the amount of the Guarantee. In May 2010, the total net borrow required is $759 million. Adding fees and commissions takes this up to $775 million in total.