The government has refinanced $ 500 in debt, said Treasury Minister David Bert. “The successful implementation of this refinancing initiative, coupled with recent positive reviews by independent rating agencies, put Bermuda on the right track. Reinforce that. “

Speak at Congress House last night [July 15] Prime Minister Bert said:

“On Monday, July 11, 2022, with the unanimous support of the Bond Advisory Board, the Government prioritized cost and aimed to fully refinance its December 2022 and January 2023 maturities. We have launched a new issue with a target size of $ 500 million.

“Bermuda issued $ 500 million on US Treasuries with a spread of 210 and an all-in-placement yield of 5.084%. Priced with a coupon of 5000%, total revenue was $ 496.74 million. New issuance and bidding of 4.138% Senior Notes with a maturity of 2023 ended early today.

“The Government will use all remaining revenue to redeem or pay maturity of all outstanding short-term debt, including all bills due in January 2023 that were not bid.

“Given the current interest rate levels, the government did not accept bids for bonds due in 2024. As a result, Bermuda’s remaining medium-term debt was approximately $ 450 million in December 2023. $ 50 million, the rest due in February. 2024. The government will continue to monitor market conditions and the opportunity to refinance them in due course. “

The full text of the premiere is below.

Chair, thank you for delivering this Ministerial Statement.According to Section 2 [3] With the enforcement of the Government Loan Act of 1978, we are pleased to inform this prestigious home this afternoon that a new $ 500 million senior note has been successfully issued with a 5% coupon that ended earlier today.

On Wednesday, July 6, 2022, the Bermuda government launched a three-day virtual roadshow with a series of fixed income investors. These meetings are part of the process of updating investors for government plans and recent performance, including market conditions and some or all of the existing debt that is due to mature within the next 18 months. I appreciated the opportunity to refinance. At the same time, it was announced that Bermuda would offer a cash repurchase at the same time. These are two series of unpaid US dollar-denominated bonds that will mature in a tender offer in 2023 and 2024.

Feedback from speakers and investors has greatly supported the proposed new offering. As a result, on Monday, July 11, 2022, with the unanimous support of the Bond Advisory Board, the Government aims to prioritize costs and fully refinance its December 2022 and January 2023 maturities. As a new issue with a target size of $ 500 million. .. Initial demand from investors generated more than $ 2.5 billion in orders covering more than five times the target size, allowing the government to tighten spreads from initial price negotiations to US Treasuries. [IPT] 250 basis points x 40 basis points. Compared to the fair value estimated based on the trading level of Bermuda’s existing bonds, Bermuda paid a negligible or negative new issue premium. A few days ago. Spreads are generally high in this volatile interest rate environment, but achieving this new issuance premium is an excellent result from a very successful run.

Mr. Speaker of Bermuda issued $ 500 million on US Treasuries with a spread of 210, with an all-in-placement yield of 5.084%. Priced with a 5.000% coupon, total revenue was $ 496.74 million. New issuance and bidding for 4.138% Senior Notes with a maturity of 2023 ended early today. The Government will use all remaining revenue to redeem or pay maturity of all outstanding short-term debt, including all bills due in January 2023 that were not bid.

Given current interest rate levels, the government did not accept bids for bonds due in 2024. As a result, Bermuda’s remaining medium-term debt is approximately $ 450 million, due in December 2023 for $ 50 million and the rest in February 2024. .. The government will continue to monitor market conditions and the opportunity to refinance them in due course.

Chair, it is important to note that although interest rates are rising, the government continues to manage fiscal policy carefully and effectively. As recently announced, it will reach a deficit of approximately $ 95 million in 2021/22, an improvement of approximately $ 30 million from the initial estimate. We are also working to achieve our financial goals in the future. After this refinancing, annual interest expense will increase by only about $ 2.3 million, but the average cost of capital will only increase by about 6 basis points while reducing the risk of short-term refinancing risk.

Speakers, other details and transaction highlights are:

  • US $ 500 million 5.000% 10 Year Senior Note, US Treasury + 210bps, Reoffer Yield 5.084%
  • Revenue allocated to
    • Pre-funded $ 140 million 5.73% private placement due December 2022
    • Financing a $ 354 million senior note bid due in January 2023
    • Raise intended full redemption funds to clean up the remaining 4.138% of senior notes due in January 2023
  • New deals have hit the market in a month of high market volatility, including a June 8.6% inflation report in the U.S., a conflict between Russia and Ukraine, and a significant slowdown in primary and secondary bond market activity. ..
  • The marketing activities were led by me as Minister of Finance and Deputy Minister of Finance, a senior team member of the Ministry of Finance, and a representative of the Bermuda Monetary Authority.
  • The market reaction was extraordinary, with orders from selected pools exceeding $ 2.5 billion, especially in the context. [93 names] The number of participating accounts that allowed concessions for very low new issue prices. Despite the strong situation, at UST + 210bps, the transaction price was slightly above the average of 203bps for the past year from 2013 to 2020. This reflects Bermuda’s high quality / rating, resilient economic performance, continued fiscal prudence and debt focus.management [2021/22 estimated fiscal deficit of 1.3% of GDP, 43% debt/GDP]..
  • Based on the estimates of existing notes at the time of market opening on July 11, 2022, the estimated fair value of the new 2032 notes was 214 basis points. If Bermuda issued at 210, this means that there was one of the lowest high-grade issuances in 2022, a negligible or negative new issue premium. This shows that investors have completely absorbed the price adjustment. The appropriateness of the debt management strategy implemented in this transaction.

Thanks to Speakers, everyone who has played an important role in supporting the Bermuda government in this transaction. They include HSBC and Goldman Sachs as advisors and co-lead managers, Milbank LLP as US advisors to the government, and all other parties and advisors to the transaction.

We would also like to thank the local industry experts who are members of the Public Debt Advisory Board for their support and full support of the government’s implementation strategy. And finally, we would like to thank the Treasury team for coordinating and leading this important initiative and supported by colleagues from all other ministries, including the Bermuda Monetary Authority, the Business Development Agency and the Bermuda Tourism Board.

Chair, our focus on these issues was to ensure that Bermuda continues to implement a strong and strong fiscal and debt management strategy. The success of this refinancing initiative, coupled with recent positive reviews by independent rating agencies, confirms that Bermuda is on the right track. We will continue to focus, be vigilant and carefully manage the assets of the Bermuda Government so that we can protect and provide the people of Bermuda in a fair, impartial and sustainable manner.

Thank you, Speaker.

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