In about two years Cayman will be forced to “bite the bullet.”
That’s when the $312 million bullet bond will become due.
We want to know what exactly is this “bullet bond?” We sat down with Finance Minister Hon. Roy McTaggart to find out.
In 2009 Cayman’s government borrowed $312 million on the open bond market and it’s due to be paid back in about 2 years time.
“That all matures, that debt instrument of $312 million matures in November 2019 at which time we are obligated to repay it all
The Minister said Cayman’s government cannot repay the “Bullet bond” on its own.
“It would deplete our cash reserves to an unacceptable low level,” he said.
Something, he said, cannot happen since it could breach the Framework for Fiscal Responsibility and put us back under UK oversight so the country will have to do some additional borrowing.
“We will repay that bond in total but then we go back, most likely to the local banking market, and borrow some money back. The net effect of it is that we are refinancing a portion of it,” he said.
For the past nine years, Cayman has paid about $16 million in interest on the loan per year leaving the entire principal remaining.
Mr. Mctaggart said government likely will use some cash reserves toward the principal and would borrow to pay off the remainder.
‘We would like to see a self amortizing loan whereby we make monthly payments to principal and interest. The reason we would like to do that it is a more disciplined approach and it is easier to budget and manage for that,” he said.
Mr. McTaggart said Cayman’s economy is doing well and he anticipates we will be in a good position to pay the bond as for the refinance. He said anything left over will be banked as savings.
The Government anticipates the only borrowing it will have to do this budget cycle is to help pay off this bullet bond.