$50m bond offering fully subscribed

Local investors snapped up Government’s $50 million bond notes. 

Government launched an offering of $50 million Senior Notes on December 2. These notes were targeted at local investors. 

Butterfield Securities was selected as the sole bookrunning manager for the offering. 

The Ministry of Finance conducted meetings with local investors, which has paid off handsomely.

These meetings were to provide an update on economic and fiscal developments. More importantly, local investors were also informed of the Government’s plan to turn around the economy and reduce deficit levels. 

This also allowed the Ministry to evaluate local market conditions and potential funding opportunities to implement their new multi-year borrowing strategy as announced earlier this year. 

This strategy will give the Government certainty of financing instead of borrowing on a year to year basis in a rising interest rate market. The Government will be locking in low rates saving on interest cost.

Minister of Finance Bob Richards said in a press release: ‘“The Ministry of Finance has long discussed using the domestic capital market for some of the Government’s financing needs and I indicated earlier in the year that if rates of interest were competitive Government proposed to finance some of its borrowing requirements with the issue of a local bond. 

“This policy choice was intended to spur more economic activity in Bermuda, to stimulate local capital markets and to provide Bermudian investors with an opportunity to feel that they are being part of the development of our country’s affairs. The issue supports the local markets as the Government bonds are listed and trading on the Bermuda Stock Exchange”. 

Highlights of the transaction include:

• On Monday, December 16, 2013, the Government of Bermuda raised B$50 million in 10-year bonds at a yield of 4.75% — for a spread to US Treasuries of 191.1 basis points;

• Fully subscribed, broadly distributed across nearly 250 retail, high net worth and local institutional investors (including Butterfield, the underwriting institution);

• All retail and high net worth investors who submitted subscription forms by the deadline received 100 per cent allocations;

• Approximately two-thirds of orders (66 per cent) were for subscriptions of BD$50,000 or less, 90 per cent of which were from Bermudians (individuals and companies);

• The low pricing and decent orderbook confirmed that the local market have a very favourable view of the Bermuda credit story despite ongoing economic challenges;

Mr Richards said: “I am pleased with the results of this successful bond offering which was the first local public bond offering by the Government of Bermuda, for many years. I am also particularly delighted with the competitive rate attracted by this issue. 

“This transaction has created a new source of funding for the Government and expanded local capital markets. It has also provided a new investment product and opportunity locally which keeps capital here on the island.” 

For potential investors who were not able to participate in the offering during the marketing period and still have an interest in acquiring local bonds, there is a local market for them, therefore they should contact one of the local brokerage firms for assistance.