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CITCO BOND 3

CitCo set to float municipal bond

The Belize City Council under the Bernard Wagner administration launched a municipal bond this morning.  The bond is centered around seven million dollars with a possibility to be increased to ten million dollars. 

The Belize City Council under the Bernard Wagner administration launched a municipal bond this morning.  The bond is centered around seven million dollars with a possibility to be increased to ten million dollars.  According to Christopher Coye, a certified public accountant, the seven million dollar bond will make available three million dollars in capital for the Belize City Council.  Investors will be able to buy bonds through the fiscal agent, Heritage Financial Services Limited.  The bonds are being offered at five thousand dollars each and are open for individuals and institutions.

This is not the first time that the Belize City Council is floating a municipal bond.  Back in 2012 under the Darrell Bradley tenure the council floated a bond for twenty million dollars to address the infrastructural needs of Belize City.   With this bond, Dr Louis Zabaneh explained that this new bond is short term, it has three tranches and will bring better rates for the investors.

Dr.Luis Zabaneh: “With this instrument in the financial sector I think that it’s a special day in the history of the financial sector in Belize. It is a short term instrument as compared to other bill so financially speaking for this instrument we would call something that matures between say three months and a year bills and then bonds thereafter. So you’d go maybe you have five year bonds and ten year bonds and maybe longer term bonds and you have a yield curve for which the longer the term the higher the yield. The benefit of having a short term bond like this is that we’re looking at relatively attractive rates. This is what we’re looking at in terms of the different options so investors, depending on what they’re looking for, will decide if they want some of tranche one, some of tranche two or some of tranche three yielding different rates. We see the spread of  between the weighted average deposit rate and the weighted average lending rate of about 7.62% and if you look at it historically while the lending rates have fallen to about 8.76 they were up around fourteen but so were the deposit rates, the deposit rates were also higher and those came down so that interest rate spread really has not narrowed too much. We now have this opportunity of this instrument where you can come in and get a better rate somewhere in between that spread and it makes the entire financial system more competitive and that’s certainly a good thing for businesses and entities like the Belize City Council.”

So, how will this relatively small bond assist the operations of the Belize City Council?  Well, according to Mayor Bernard Wagner it will assist them in several ways including with their overdraft facility and their slow revenue season.

Bernard Wagner, Mayor of Belize City: “What we found when we entered office on March 7 2018 was clearly a financial black hole. We had contracts totalling over $7 million, pending contracts, that has been reduced since we had a high supply of suppliers credit on the books this was in the area where leading up to the election the council took the initiative to build streets, they couldn’t go to local government to get approval so they went and got suppliers credit and that left us with a huge suppliers credit bill that we are still grappling with as we speak today. We had a poor cash balance position, our cash balance was just under a million dollars, eight hundred and forty four if my collection tells me correct. We had a situation where the property tax arrears was increasing every single year and no adequate provision was being done, no adequate provision being put in place to ensure that what is on the books or on the balance sheet truly represents what is collectible and that is what we also faced. We’re always hearing people saying “Oh we don’t see you doing any infrastructure.” but how can you sit there and ask this council how can you do infrastructure works when you took away all the monies to service the debt? What do you want me to do? Make blood out of stone ? I just can’t. So we took the position that we would gradually work the system, we wanted to ensure that we reduced wastage, unnecessary spending, we knew that the council was borrowing from the people or the residents of the city at 20% and we said we couldn’t sustain that, 20% we couldn’t continue to sustain that.  It’s all been a systematic approach to ensuring where we are today, we wanted to lower the cost of finance from 20% when we came in we took it down we went to the banks and told the banks listen we wanted an overdraft and we got that overdraft from the banks at 8% average but today now when we stand here we are saying we want to take it down further and that is why we are now launching this bond which on an average it will be in the area of 3.45%. So we have took interest cost from 20% to 8% and now today we want to see greater savings for this council.”

The bonds are now available for purchase.