Grenada’s recent default on an international bond and uneasiness in the long-term capital market have been blamed for St. Vincent and the Grenadines being unable to successfully auction an EC$40 million (One EC dollar = US$0.37 cents) 10 year-bond.
The bond was auctioned on March 19 to assist with financing of public sector investment programme for 2013 and at the close of the action, 11 bids totalling EC$25.9 million had been received.
Prime Minister Dr. Ralph Gonsalves said marketing could also have contributed to the under-subscription of the bond.
“The Director General of Finance and Planning advises me that the marketing was not optimal,” Gonsalves said and alluded to Grenada’s recent default on its bond.
“The broker made very little effort to market the bond, with only eight entities purchasing the new issue, compared with 15 in the maturing issue. Indeed, the broker didn’t bring any new investor to the table.”
Gonsalves said “uneasiness in the long-term capital market, as a result of the current global economic situation and domestically, we believe too, with the Building & Loan Association issue” also contributed to the situation.
He said the maximum rate of interest was seven per cent to be paid semi-annually, the pricing mechanism was competitive bidding, repayment was to be amortised semi-annually and the maturation date was March 19, 2023.
The bond was auctioned on regional government securities market using the primary platform of the Eastern Caribbean Securities Exchange (ECSE) and Gonsalves said the government had decided not to ask the Trinidad company, which arranged the bond last year, to arrange the recent auction.
“We say let’s see how Bank of St. Vincent and the Grenadines will do. We asked them to be the arranger for the bond and investors were required to submit bid through any of the licensing intermediaries through the ECSE.”
Gonsalves said investors seem reluctant to commit to longer-term subscription, as evidenced by the Bank of St. Vincent and the Grenadines initial public offer, which was also under subscribed.
“I want to say this, and I want this point to soak in. investors have an uncertainty about long-term bonds of 10 years. They prefer to take shorter-term risk and wait and see, given the uncertainty in the climate.”
He said while the bond was undersubscribed, treasury bills offered one week later were over-subscribed by almost nine million dollars.
“And the treasury bills settled on a rate of less than three per cent, which was excellent. What this is telling us is that people are looking for shorter-term money.
“I have been advised by my financial advisors that they are quite confidence of the sale of the other $14 million on the market, nevertheless,” Gonsalves said.
Source-Global Post
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