GDB doubles Wall Street deal to $1B
“We saw very strong investor appetite,” GDB Vice President for Finance José Otero told Bloomberg News Service. “We were able to increase the deal size.”
The deal will be used to retire debt and to boost the bank’s liquidity, GDB President Juan Carlos Batlle told CARIBBEAN BUSINESS. The taxable notes will come due between 2015 and 2017, with the longer term notes offering investors an initial yield 4.49%, according to Bloomberg.
"We will mostly use the bond issue for old debt, but we will probably take some of the money for liquidity," Batlle said. "Sometimes, you have to forgo profitability to push liquidity."
The shorter-term notes are currently a "better funding mechanism for the bank," the GDB chief said. "It's a very deep market with a lot of demand, and if rates start to go up, you don't have to refund," he said.
GDB officials have been talking up the deal with investors in New York, Boston and Puerto Rico. Also for the first time, the GDB has reached out to investors in Chile to take part in the deal. Batlle called the development "testing the waters" of a new market, and said it stemmed from the GDB's desire to expand its investor base and to support government economic-development efforts.
Batlle said GDB officials were surprised to find that a $650 million government bond issue last year attracted $20 million to $30 million from Asian and European investors, and decided to explore searching for new markets.
He said the Chilean investment market is "bigger than most people think" and that the country, and the entire South American region, has actually been performing well economically during the prolonged global slowdown.
"Investors there are looking for new opportunities, so it doesn't hurt that they get to know us," Batlle said. "This could help in future economic-development opportunities as well."
The GDB is also preparing large refinancing deals for the Puerto Rico Aqueduct & Sewer Authority and the Puerto Rico Highway & Transportation Authority in the coming months.
Voracious investor demand for municipal securities, coupled with a decline in borrowing by state governments, are driving up the price of Puerto Rico's bonds. Investors told Bloomberg that "medium-rated credit" like Puerto Rico's is the best buy in today's market, with yields substantially above their historic averages.
Batlle said that despite Puerto Rico's continuing economic and financial challenges, the GDB's finances are "healthy," with $15 billion in assets, a capital base of $1.8 billion and a leverage ratio of 7.5, below the industry average.
He said that the administration's improved management of government finances has boosted investor confidence in Puerto Rico.