Guam lowered its debt, moving $412.5 million of loans issued in 2007 and 2009 from low-rated general obligation bonds to A-rated BPT bonds. The interest rate dropped from approximately 6.42% (7.28% for the 2009 GO and 5.56% 2007 GO) to the lowest rate for long-term bonds GovGuam has ever been assigned: 4.02%.
That lower rate ends up saving taxpayers $45.3M in debt payments. Guam saves $1.975M as soon as the sale is final.
Economies throughout the world are faltering or struggling. However, Guam’s business privilege tax collections have been strong and are steadily growing. Not only does that show investors in our bonds that GovGuam is relying on a good repayment source for our debts, it also is indicative of continuous growth in our economy.
Investors had so much confidence in the Calvo administration’s handling of finances and the state of the Guam economy that they made of $1 billion in orders for $412.5M in Guam bonds. This confidence in the BPT from the financial markets is in stark contrast to the Guam Legislature’s stance on the BPT, which is what led 13 senators to underfund several agencies and critical services.
The Series D Bonds were sold in an extremely challenging market characterized by extreme volatility in both equity and debt markets. The stock market fluctuated wildly during the week, sparked by concerns over growth in China, while Treasury bond yields rose 12 basis points during the day of pricing. It was also a busy Municipal Bonds selling calendar with Guam’s BPT Bonds being offered alongside the California’s $2 billion GO Bonds and the state of New Jersey’s $2.2 billion Appropriation Bonds.
The BPT Series 2015D Bonds refunded all of the 2007 General Obligation (GO) Bonds and all of the callable 2009 GO Bonds. The BPT Bonds were rated ‘A’ by Standard and Poor’s and ‘A-‘ by Fitch Ratings, both with a stable outlook.
“This outstanding performance in a very difficult and busy bond market is yet another reflection of how this administration’s fiscal policies are helping to stabilize the overall financial health of the government,” Governor Eddie Baza Calvo said. “Had we received legislative approval back when the bill was originally introduced in April, the Government could have achieved even more savings. I thank my team for successfully moving forward despite all these hurdles.”
The BPT Series 2015 D Bonds are expected to close next Thursday.
The legislature authorized the 2007 General Obligation (GO) Bonds to pay for capital improvement projects at the Guam Memorial Hospital and other health care needs. The 2009 GO Bonds paid for Tax refunds, COLA settlement agreement, GMHA CIPs and past due retirement fund contributions on behalf of GMHA and GDOE. These bonds were issued years before Governor Calvo became the governor.
Taxpayers were paying a much higher interest rate on these bonds because of the financial crisis and huge deficits of those days.
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