Eustace: I want to know who took up the bonds

Leader of the Opposition Arnhim Eustace is calling on Prime Minister Dr Ralph Gonsalves to tell the people of this country just who bought the Government of St Vincent and the Grenadines (SVG) $40 million 10-year bond issue which was auctioned on the Regional Government Securities Market (RGSM) on April 27.{{more}}

A release issued last week by the SVG Ministry of Finance and Economic Planning said the bond issue was oversubscribed by $285,000, and the success of the bond issue “reflects the public’s confidence in the RGSM and in particular securities issued by the Government of St Vincent and the Grenadines.”

In the sale of the bonds, a competitive uniform price auction methodology was used and the closing rate was 7.5 per cent. Three licensed intermediaries placed a total of 20 bids, ranging from $10,000 to $10.0 million, with an aggregate value of $40,285,000.00 million, the release said.

Last Wednesday, Prime Minister Dr Ralph Gonsalves, commenting on the bond issue, said the rate of 7.5 per cent is a good rate for 10 year bonds and reflects the confidence of the market in the management of the economy.

“As soon as the listing was opened, in a very short time, the bond was oversubscribed. That is to say, every single cent of the $40 million was taken up,” he said.

“This reflects the way the government has been going about its business and finances; in an orderly way. And at the same time, it reflects the confidence of the market in the management of the economy, even in these difficult and challenging times,” Gonsalves said.

The Prime Minister said some persons had suggested that the bonds would not sell, as one or two countries had deferred on their bond issues, while one country had defaulted.

“Well, we didn’t pay any attention to that. We simply went to the market when we said that we will go to the market, when we had a date from the RGSM and the market has responded appropriately,” Gonsalves, who is also Minister of Finance, said.

However, Eustace, speaking on his New Times Radio programme yesterday, said it is very important that the public be clear about what is happening with the bond issue.

Stating that nothing is wrong with floating a bond issue to help with the public sector investment programme, having a bond issue oversubscribed by $285,000, less than one per cent of the bond value, is nothing to brag about.

“So you just barely went over the mark. When we had treasury bills and you wanted $20 million and you get $30 or $35 million, that is what is oversubscribed! Not when you barely scrape past. I want to know who took up the bonds,” Eustace asked.

“Did the business that is issuing the bonds take any? If so, how much did they take? Who took up the $40 million?

“I want the Prime Minister to tell this nation that, because I don’t regard that as oversubscribed. You barely scrape through, which means that the investors had doubts. It means that you just barely made it. It is nothing to brag about; it is something to examine and see what we can do to improve our financial performance, so that people don’t have any doubts, so that when you put out a bond issue there… you would have more people coming to buy than you need.”

Eustace said the fact that the bond issue was only oversubscribed by $285,000 is a warning that things are declining in the economy and the public should be told the truth.

The Leader of the Opposition also queried how much of the bond issue was bought by people and institutions here in SVG and how much was bought by institutions outside of SVG.

“I want to know, because that is what will give me confidence,” he said.

Eustace said some of our OECS countries have serious economic problems which have to be addressed, as they could impact on all of us, as the international community does not see us as separate, as we are one economic space, attracting both domestic and foreign investment.

On November 25, 2011, the government of St Kitts-Nevis failed to meet its 18th interest payment obligations on a 10-year bond, while last year, the International Monetary Fund suspended its stand-by arrangement with the government of Antigua and Barbuda, following that government’s decision to bail out the financially faltering ABI Bank with a $40 million influx of funds.

“They look at what is happening in each country,” Eustace, an economist, said.

Eustace said while what is happening in other OECS countries impacted on the sale of the recent SVG bond issue, the state of our own finances and how investors see it also contributed to investors’ decisions.