SVG

SVG’s $40m bond under-subscribed by $14m

KINGSTOWN, St. Vincent, March 27, IWN — An EC$40 million 10-year bond auctioned by the Government this month was under-subscribed by $14 million.

Prime Minister Dr. Ralph Gonsalves said the under-subscription resulted from poor marketing, Grenada’s recent default on its bond and uneasiness in the long-term capital market.

The bond was auctioned on March 19 to assist with financing of public sector investment programme for 2013.

The maximum rate of interest was 7 per cent to be paid semi-annually, the pricing mechanism was competitive bidding, repayment was to be amortised semi-annually and the maturation date was March 19, 2023, said Gonsalves, who is also Minister of Finance.

He said the bond was auctioned on regional government securities market using the primary platform of the Eastern Caribbean Securities Exchange (ECSE).

Gonsalves said the government had decided not to ask the Trinidad company, which arranged the bond last year, to arrange the recent auction.

“We say, let’s see how Bank of St. Vincent and the Grenadines will do. We asked them to be the arranger for the bond and investors were required to submit bid through any of the licensing intermediaries throughout the ECSE.”

At the close of the auction at 12 noon on March 19, 11 bids totalling $25,912,00 was received — an under-subscription of $14,088,000.

He said the main reasons for under-subscription could be attributed to marketing.

“The Director General of Finance and Planning advises me that the marketing was not optimal,” Gonsalves said and alluded to Grenada’s recent default on its bond.

“… uneasiness in the long-term capital market as a result of the current global economic situation and domestically, we believe too, with the Building & Loan Association issue.”

He said the March 19 bond coincided with the maturity of the $30 million 10-year bond on March 16.

“The broker made very little effort to market the bond, with only eight entities purchasing the new issue, compared with 15 in the maturing issue. Indeed, the broker didn’t bring any new investor to the table.”

Gonsalves said investors seem reluctant to commit to longer-term subscription, as evidenced by the Bank of St. Vincent and the Grenadines initial public offer, which was also under subscribed.

“I want to say this, and I want this point to soak in. Investors have an uncertainty about long-term bonds of 10 years. They prefer to take shorter-term risk and wait and see, given the uncertainty in the climate.

“To give you an indication of this, while we had an under-subscription of just about $14 million on this 10-year bond, one week earlier, on March 12, we had an over-subscription of almost $9 million on our treasury bills and the treasury bills settled at a rate of less than 3 per cent, which was excellent. What this is telling us is that people are looking for shorter-term money.

“I have been advised by my financial advisors that they are quite confident of the sale of the other $14 million on the market, nevertheless.”

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Discussion

5 thoughts on “SVG’s $40m bond under-subscribed by $14m

  1. MR ARNHIM EUSTACE WAS TRYING TO TELL ST.VINCENT AND THE GRENADINES THAT ALL THE TIME BUT THOSE PEOPLE WITH ALL THEIR FANCY WORDS WAS PLAYING ON THE POOR MASSES MIND,BUT IT NOW COME TO PASS , FOOL TALK BUT NOT FOOL AH LISTEN.

    Posted by Isola Ollie | March 30, 2013, 08:58
  2. This is not the first financial instrument that we have been undersubscribed by about one third, previously the broker taking up the unsold paper, to hide the shortfall.

    I just hope that our NIS have not been convinced to buy some of this latest bond, its a bad investment.

    If PetroCaribe falls apart, SVG will be down the drain in a very short period of time. Its only by our government hiding our real position to the World, by under paying PetroCaribe by about 40% on each payment of oil, and then using that cash to stay afloat, that we have not defaulted months ago.

    Let there be no doubt SVG is in very serious trouble, Cyprus has just taken up to 60% of all investors savings and deposits, straight from their bank accounts. Imagine what that will do to all the SVG laundry shops, and associated cafes.

    Investors have cut back on buying the bonds of small countries, they have been taking a hiding on being repaid, forced to take a haircut, getting back less than they invested.

    Grenada is in trouble and defaulted on government bonds.

    St Kitts and Nevis, the smallest independent state in the hemisphere, took a hit when it defaulted on a bond payment the end of November 2011.

    Jamaica remains in serious difficulty, even since in February 2010, the IMF approved a billion dollar agreement with Jamaica (pop 2.6 M), the most populous of the 15 Caribbean Community (CARICOM) countries, of which the OECS is a subset, after the then prime minister, Bruce Golding, negotiated a restructuring of domestic debt.

    But in a world in which high tech communication, information processing and logistics are kings, and in which countries like St Kitts and Nevis and its OECS and CARICOM partners retain their status as clients delivering primary products, whether to OECD or BRIC states, the immediate future is debt, default and economic death before any glorious resurrection.

    The idea of using debt to pay debt becomes a cycle and when the rates are this high, its ridiculous. Replacing low interest rate debt with high interest rate debt is the kiss of death. Borrowing to repay previous borrowing must bring national disaster.

    The major problem is in the Caribbean we have a bunch of leading politicians that actually believe they know what they are doing, yet when it comes down to it they are just a bunch of third rate know-all know-nothing idiots, in most cases they just don’t know what day of the week it is. And we don’t need to look to far from home to find evidence of that.

    Any one lending to any small government can be sure of losing a major part of their investment. The situations are so serious now that only support and help from the IMF and World Bank can be used to save some states from total collapse.

    In the case of SVG, if I was the IMF, World bank or any large lender, I would be insisting that Mr Gonsalves fully explain what he means when he says he is here to finish the work of Maurice Bishop, otherwise not one dime would be forthcoming.

    Posted by peterbinose | March 31, 2013, 15:24
  3. Gonsalves wrote “To give you an indication of this, while we had an under-subscription of just about $14 million on this 10-year bond, one week earlier, on March 12, we had an over-subscription of almost $9 million on our treasury bills and the treasury bills settled at a rate of less than 3 per cent, which was excellent. What this is telling us is that people are looking for shorter-term money”.

    You see, I know I keep reiterating about the PM telling lies, its just as bad in my mind to make an omission of some important detail, only telling half the story.

    The treasury bills are 90 day Bills, they are discounted by 3 percent, that is equal to 12% interest on an annual basis. What a 3 % discount means, when the investors buys the bills, they only pay 97% of their value, Which means they get a 1% interest allowance for each month, that makes the bills very expensive borrowed money for SVG at 12% per annum.

    When Gonsalves tells us investors are looking for shorter term investments, that is only half of the truth. What the investors are looking for is short term money that pays them 12% per annum, a very high rate of interest. They also know within 90 days if they have bought a pup.

    Please tell us the whole story, not half a story, because half a story presents us with a total lie.

    Posted by peterbinose | March 31, 2013, 16:02
  4. Does anyone know if Grenada repaid the money that they borrowed via us to pay wages?

    Its really important that we have the answer to that.

    Posted by peterbinose | March 31, 2013, 20:02
  5. 2ND REQUEST

    Does anyone know if Grenada repaid the money that they borrowed via us to pay wages?

    Its really important that we have the answer to that.

    Posted by peterbinose | April 15, 2013, 14:00

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