CDA: Governor remains committed to floating bond

Despite the passage of the casino law and online gaming on Saipan, the Inos administration remains committed to floating a pension obligation bond to meet its cash flow needs, according to Commonwealth Development Authority executive director Manuel Sablan.

However, he confirmed that no final amount has been determined yet for the planned POB.

Some two weeks ago, CDA executives met with Gov. Eloy S. Inos to discuss the planned flotation of the bond. In that meeting, CDA was specifically asked what other information it needs to begin the process.

“We’re going through the process now and reinstating the discussion with our bond underwriter and bond counsel. But we have yet to take the formal steps to begin the process,” Sablan told Saipan Tribune.

The CNMI is working with Barclays as its underwriter. The company had acquired Lehman Brothers, which floated $100.49 million in general obligation bonds for the Commonwealth back in 2007.

When asked if there’s urgency to float the bond at this time, Sablan replied: “The urgency would depend whether they need the cash. If they generate [some monies] now, maybe the needed amount [for the POB] would be scaled down.”

At a February board meeting of CDA, it was disclosed that the CNMI government is targeting to float a higher bond amount of $120 million after analysis of the government’s financials showed that it has the capability to handle paying a higher debt service amount. This is higher than the initial target of $80 million and $60 million. This will happen if the CNMI gets an investment grade rating of at least BBB.

Sablan disclosed that CDA is set to meet anew with the governor to finalize the amount to be floated for the pension obligation bond.

“The final decision on how much we need to float entirely depends on the governor,” he said.

Sablan, however, cannot immediately say how soon the POB packet can be put together.

“We’re still on [with the POB]. As to the timeframe, all depends on how much the governor wants to float and when he needs the cash flow requirement,” he added.

CDA is aiming for a higher credit rating so the proposed POB float will get a lower interest rate. Part of the effort in getting a higher rating and lower interest rate is using gross receipt taxes as a pledge. The amendment to the POB Act of 2013 specifically provides for the use of gross receipt taxes for repayment of the bonds. Unlike revenue bonds, POBs are taxable and command higher interest rates. The CNMI has had a good history of meeting its bond payments. It is current on payments on all bonds issued.