The V.I. Public Finance Authority has sold $228.8 million of bonds secured by V.I. Gross Receipts Taxes, largely aimed at replacing existing debt at much lower interest rates, according to a statement from Government House Friday.
About $196 million of the funds are earmarked to refund outstanding high-coupon bonds issued in 1999 as well as to refinance outstanding bank loans and bonds that funded working capital and ongoing operations of the government, cementing a lower, fixed rate.
It will also provide about $30.4 million for matching funds for the V.I. Next Generation Network’s federal grants, replacing a higher-interest-rate bank loan.
Gov. John deJongh Jr. said in a statement that the tax-exempt bonds were sold at an all-in cost of 4 percent for the 20-year bond issue, allowing the government to substantially lower its interest costs payable from Gross Receipts Taxes. The yields on the three term bonds of 2.3 percent, 3.25 percent and 3.875 percent are the lowest interest costs achieved on a long-term financing by the Public Finance Authority since its creation, according to deJongh. He said investor demand was strong, as mutual fund companies, asset managers and insurance companies put in orders for almost a billion dollars of bonds, allowing the interest cost to be pushed to the final low level.
“This is a good time to be in the market, and a good time for the investment community to come on board. We are gratified by the strong support for this issue, and, frankly, the 3.875 percent rate on the long end was a wonderful surprise," deJongh said.
“The market response continues to be strong to Virgin Islands issues,” said Troy Clark, the Jefferies banker that co-led the financing team. “Institutional investors have done a lot of work digging into this credit and clearly they liked what they saw. The real strength of support for the Virgin Islands can be seen by comparing results with like-rated paper that is trading over 100 bps above the levels we see here.”
“In addition to reducing our ongoing financing costs, we realized $8 million in cash flow savings that will provide important budget relief," Commissioner of Finance Angel Dawson Jr. said, going on to say the administration hoped the Legislature will act quickly on the capital projects and energy legislation they have before them. Dawson also serves as executive director of the Public Finance Authority and managed the financing effort.
”This is a good time to be in the market, and we would like to move forward with those important projects," Dawson said.