The Virgin Islands Public Finance Authority sold $36 million of Matching Fund Revenue Bonds on Tuesday, according to Government House.
The bond issue included a restructuring of existing debts to provide budget relief in the upcoming 2014 fiscal year, as well as the refunding for savings of a portion of the PFA’s outstanding Series 2004 Bonds. The financial restructuring and refunding combined to create $22.7 million of overall debt service savings for the upcoming fiscal year.
The tax-exempt bonds were sold at an all-in cost of 4.01 percent for the 11-year bond issue. The bond issue comprised two term bonds due in 2018 and 2024. The two term bonds were sold with yields of three percent and 4.55 percent respectively. The bonds were placed in their entirety with institutional investors that included mutual fund companies, asset managers and insurance companies.
Gov. John deJongh Jr. said the bond sale was an important piece of the V.I. government’s budgeting process.
“This bond sale and the debt-service savings that we achieved were essential to the budget for 2014," he said. "While interest rates have risen as investors anticipate the end of the Federal Reserve Bank quantitative easing, we were nonetheless successful in achieving our financial objectives. This was an important transaction, and we are gratified by the continued support of the investor community that has enabled us to implement this restructuring.”
Completing the sale before the end of the current fiscal year, which ends Sept. 30, was an essential piece of the budget puzzle, according to Commissioner of Finance Angel Dawson, Jr. who, as executive director of the Public Finance Authority, managed the bond sale.
"With the diligent efforts of all involved, we were able to complete it on schedule,” Dawson said. “This sale allowed us to realize $22.7 million of debt-service savings that will be an important part of the Fiscal Year 2014 budget. Because of rising interest rates in the market, we chose to scale back the size of the refunding; however, we will continue to monitor market conditions to identify additional out-year savings.”
Troy Clark, the Jefferies banker that led the financing team, said the sale shows the market continues to support Virgin Islands issues.
“We asked the investment community to accept bond yields that were well below the market yield of Guam and Puerto Rico bonds, and were successful in achieving that outcome,” Clark said.
