The Commonwealth has settled on a federally required financial adviser to guide and package a $30-million pension obligation bond that Gov. Eloy S. Inos aims to float through the Commonwealth Development Authority.<\/p>\n
According to administration and CDA officials, the bond flotation aims to ease the impact the millions of dollars in annual payments to the Settlement Fund has on government revenues and public service programs.<\/p>\n
For fiscal year 2015, some $27 million was paid out of government appropriations to meet the minimum annual payments sufficient to allow the Fund to pay 75 percent of class members\u2019 full benefits. In fiscal year 2016, the government projects to pay out a total of $30 million to meet this obligation.<\/p>\n
These figures are a major chunk of projected revenues for allocation for those two fiscal years, at $134.33 million and $145.8 million, respectively.<\/p>\n
BLX Group\u2014the group that offered the lowest price and had background knowledge of the CNMI as the adviser on CDA\u2019s financial disclosure statements for existing bonds\u2014has been selected as the financial advisor, CDA executive director Manuel Sablan disclosed yesterday. The U.S. Securities and Exchange Commission requires any bond issuer to retain a financial adviser. BLX group signed a contract about two weeks ago.<\/p>\n
With the financial adviser now on board, CDA is able \u201cto formally move to float a bond,\u201d Sablan said.<\/p>\n
The administration and CDA have been in talks since April on how to move forward with the bond.<\/p>\n
\u201cThe administration has tasked CDA to begin exploring the possibility of us floating at least a $30- to $31-million pension obligation bond,\u201d Sablan said in an earlier interview. \u201cWe need a number of key players: an underwriter, bond counsel, bond trustee and most importantly\u201d a financial adviser pursuant to federal requirements that any bond issuer would have to retain a financial adviser.<\/p>\n
CDA and the administration will now need to complete a \u201cpreliminary official statement,\u201d\u2014described by officials as a comprehensive document that would spell out the purpose, the condition, and the security of the bond. The document will help the CDA package the bond and put it out to market, and will give prospective buyers a comprehensive picture of the financial viability of the issuer\u2014in this case, the CNMI\u2014in meeting the bond payments and other requirements.<\/p>\n
During a Cabinet meeting Monday, press secretary Ivan Blanco said that acting governor Ralph DLG Torres asked department heads and agencies to give whatever assistance they could to CDA if asked. CDA would need information from the departments of Finance and Public Lands, Marianas Visitors Authority, and the CIP Office, among others, Saipan Tribune learned, to show how business gross revenue tax has been collected, or how much BGRT has been collected over the last 10 years, for example.<\/p>\n
Position statement<\/strong><\/p>\n \u201cThe numbers have not been settled yet. The rates, the whole shebang, the structuring of the bond, the terms\u2014those things are in the making,\u201d Sablan said yesterday. \u201cWe are trying to complete what they call a preliminary official statement\u2014part of required documentation that has to prepared and filed.\u201d<\/p>\n The statement would cover the \u201cwhole geography, the economy, the whole shebang,\u201d Sablan said.<\/p>\n If they succeed in marketing the bond, the prospective buyer must be presented with this information to ensure \u201cyou know what you are buying,\u201d Sablan explained.<\/p>\n He said some of the economic information needed is business gross revenue tax information, audited financial statements of previous years, and previous government budgets.<\/p>\n \u201cWe are trying to go as far back as five or 10 years to provide a trend, to show where we are going, and where we are, to provide some kind of perspective going forward.\u201d<\/p>\n He said there were a numbers of benchmarks to go through. \u201cWhat is the percentage of the proposed debt service [or] annual debt service to the annual general revenue funds collected? The bigger the coverage, the better the situation. Those are the type of things that would come out of this informational package.\u201d<\/p>\n Sablan explained they would have to provide a track record for payments on existing bonds, \u201cwhether we have been delayed or delinquent,\u201d but he noted that CDA has been meeting its obligations.<\/p>\n He said they aim to create a least possible cost to the CNMI with the bond, with reasonable rates, and terms to allow for repayment, as well as terms\u2014in the event the economy substantially improves and the revenue base increase\u2014to also have the option to pay off this loan in advance of its maturity.<\/p>\n Sablan said they would need more evaluation as they go through the numbers. \u201cAny time you access the market you deal with interest,\u201d he said. \u201cThe cost to the borrower is reflected in the interest you pay on that borrowing. From the bondholder\u2019s perspective, it\u2019s the yield\u2026from our perspective, it\u2019s the cost that you have to incur.\u201d<\/p>\n At some point, CDA will make a determination on what is feasible, or \u201cwhat we can basically support without further getting us into a financial bind,\u201d he added.<\/p>\n Need for bond<\/strong><\/p>\n On the need for the bond, Sablan said \u201cthere is still a need for additional cash to meet some of the shortfalls\u201d in government revenue, noting that a major chunk of the CNMI revenue goes into the Settlement Fund.<\/p>\n \u201cAnd that cash flow was unanticipated,\u201d he added. \u201cWhen they entered into the Settlement Fund arrangement, a decision was made for a certain amount of money every year from 2014 fiscal year going forward and the chunk of the money is rather substantial.\u201d<\/p>\n \u201cIn addition to the CNMI government making payments to the Settlement Fund for a minimum of the amount specified under the settlement agreement, they also have to appropriate money to maintain and provide continuing coverage under the health insurance,\u201d he said. \u201cIt\u2019s in the book that we owe them. But from the cash flow perspective, it\u2019s something that cropped up but has to be paid. So that created a cash flow pressure on the government. So what you do when you have that pressure is you try to relieve that pressure by going into some kind of debt borrowing but make sure that it does not further get you into more financial quagmires,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":" The Commonwealth has settled on a federally required financial adviser to guide and package a…<\/p>\n","protected":false},"author":47,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[900],"tags":[366,26,8127,733],"class_list":["post-214269","post","type-post","status-publish","format-standard","hentry","category-featured","tag-cda","tag-cnmi","tag-pob","tag-settlement-fund"],"_links":{"self":[{"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/posts\/214269","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/users\/47"}],"replies":[{"embeddable":true,"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/comments?post=214269"}],"version-history":[{"count":0,"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/posts\/214269\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/media?parent=214269"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/categories?post=214269"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.saipantribune.com\/index.php\/wp-json\/wp\/v2\/tags?post=214269"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}