The $300 million in bonds approved by the V.I. Legislature late last month have been sold, enabling the government to meet payroll through the end of the year.
Although the bonds received a BBB-minus rating, the government and Paine Webber, the underwriter of the bonds, found 49 interested investors, said a Government House release Friday. The interest rate on the bonds averaged at a rate of approximately 4.20 percent and 6.20 percent, the release said. The bonds are secured by the territory's gross receipt tax.
Gov. Charles Turnbull said the bonds' "strong" investment grade rating reflects market confidence in the administration's economic policies. A demonstration of that, he said, was the signing of the memorandum of understanding with the Department of Interior.
The bond enables the government to meet its current obligations and provide sufficient cash reserves to operate through the end of the year. Had the Legislature not given Turnbull authority to seek the bonding, the administration said, it would have been $39 million short of being able to meet payroll by the middle of November and December. Without the funding the bonds will provide, Turnbull threatened as many as 2,500 government layoffs.
Turnbull originally asked the Legislature for the authority to borrow $130 million. But on Oct. 12, senators voted 12-3 to amend the governor's bill to authorize the Public Finance Authority to issue up to $300 million in bonds to fund a working capital loan.
Some $136 million will go toward tax refunds, $46 million to pay vendors, $30 million for bonding services and escrow, $30 million to pay Banco Popular and $15 million to pay the government retirement fund. The balance will be used for covering payroll expenses.
"Even though the financing has been completed and will accomplish several important initiatives, we must continue with our efforts to reduce the size of government…" Turnbull said. "Our investors expect the government to fulfill our obligation I the memorandum of understanding with the Interior Department and will be monitoring our progress."
