PORT OF SPAIN, Trinidad, Sept 14, CMC – The Trinidad and Tobago government says it has successfully issued US$560 million senior unsecured long seven-year notes at a coupon of 5.950 percent on the international capital market.
In a statement, the Ministry of Finance said that the offer was oversubscribed by three times the amount required.
Finance Minister Colm Imbert said the exceptional success of this issue underscores the market’s confidence in Trinidad and Tobago’s credit and sustainability profile. “Comprehensive preparation, good management of the country’s fiscal accounts, and rapid but strategic execution have allowed us to manage refinancing risk in a way that protects our public finances,” he added.
The ministry said Scotiabank and JP Morgan acted as joint lead managers and book runners for the transaction and that this was in tandem with the government’s announcement earlier this month of the commencement of a Cash Tender Offer to purchase any of the outstanding US$550 million aggregate principal amounts of its 4.375 percent notes due 2024.
The statement said that investors reacted positively to the pricing strategy, taking advantage of quality accounts’ limited supply and demand. This drove the order book to reach ~US$1.5 billion at its peak, representing an oversubscription of ~3x for the new benchmark.
“Key investors, consisting of mostly asset managers based in North America, displayed a significant appetite for the offering and enabled Trinidad and Tobago to place the bond with international investors based in North America (71 percent) and Europe, Middle East, and Africa (27 percent), as well as Latin America and Asia.
“Asset managers purchased 79 percent of the issue, followed by pension funds with 15 percent, insurance companies three percent, banks two percent, and other investors one percent,” the ministry said.
It said the positive feedback received from investors and solid order book momentum allowed Trinidad and Tobago to launch and price the transaction at 5.950 percent for US$560 million notes due 2031 at a spread of 1.7 percent over the current rate of US seven-year Treasury Bills, which traded at 4.37 percent on Monday, before discount.
“The overall transaction strategy proved successful and highlighted Trinidad and Tobago’s resiliency in the capital markets, despite recent volatility caused by the unprecedented sharp rise in the interest rates of US seven-year Treasury Bills, which have increased by four percent from 0.36 percent in August 2020 to 4.37 percent in September 2023, following the sharp increase in inflation in the USA after the onset of the Covid-19 pandemic.”.
The government said that proceeds from the issuance and sale of the notes will be used for refinancing the country’s outstanding 4.375 percent notes due January 2024,” adding “this landmark transaction constitutes Trinidad and Tobago’s return to the international debt capital markets following its last transaction in 2020”.
It said in the transaction on Monday, Trinidad and Tobago achieved one of the lowest coupons for a LatAm sovereign issuer in 2023 with an interest rate spread over US Treasury Bill rates that were 55 percent lower than the interest rate achieved for a US$500 international bond in 2020 and almost 45 percent lower than the spread achieved for a one billion US dollar global bond in 2016.
“It is noteworthy that the low-interest rate spread of 1.7 percent over US Treasury Bills achieved by Trinidad and Tobago is half the prevailing interest spreads of other LatAm investment grade countries, some of which are currently required to raise funds on the international market at an interest rate of over seven percent,” the Ministry of Finance added.
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