V.I. government raises $130 million by selling bonds
Published: September 7, 2012
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ST. THOMAS - The V.I. government sold $146 million of Matching Fund bonds Thursday, raising $130 million in working capital to keep the government afloat for the next three years.
The Senate authorized the V.I. Public Finance Authority - the financial arm of the government - to borrow $120 million in February.
Last month, the Senate added authorization to borrow another $10 million to pay health care providers money owed under the workers' compensation program.
Office of Management and Budget Director Debra Gottlieb said Thursday that the $130 million will be used as follows:
- $30 million for the Fiscal Year 2012 budget.
- $35 million for the Fiscal Year 2013 budget.
- $25 million for the Fiscal Year 2014 budget.
- $15 million to pay 2010 and 2011 tax refunds.
- $10 million for workers' compensation obligations.
- $15 million for the government's outstanding Water and Power Authority obligations.
The bonds were sold with a 4.45 percent interest rate for a 20-year term, well below the 9 percent limit outlined in the authorization legislation.
The bonds are among the lowest costs ever achieved on a long-term financing by the Virgin Islands government, according to a statement issued Thursday by Government House.
V.I. Finance Commissioner Angel Dawson Jr. said investors were very interested in the triple tax-exempt bonds, backed by rum revenues. The government received $600 million in orders for the bonds, which pushed the interest rates lower.
"If we had more bonds to sell, we would have sold them," Dawson said.
"The market response was extraordinary," said banking consultant Troy Clark with Jefferies Group Inc. "Institutional investors did a lot of work digging into this credit, and clearly they voted with their money and liked what they saw. This was a real demonstration of support for the Virgin Islands and its success in building the local rum industry."
The bonds were rated in the triple-B rating category by all three of the national rating agencies, with an outlook of stable to positive.
In the Government House statement, Gov. John deJongh Jr. asked the Senate to consider the still-outstanding requests to borrow another $62.5 million - $35 million for energy saving initiatives, $20.5 million to finish several capital projects already under way, and $7 million for a new police fleet.
"We have said time and again that this is a good market and that investors understand the progress we are making here. I encourage the Senate to act on our capital projects and energy legislation so that we can take advantage of the strong and continuing demand for our bonds. This is no time to put things off for tomorrow, because today we learned that we can indeed raise capital at historically low levels," deJongh said.
Dawson said the government is planning to refinance some outstanding bonds to get better interest rates and save money.
- Contact reporter Aldeth Lewin at 714-9111 or email alewin@dailynews.vi.
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