$16 million PSS bond sold

After two years of delay, the Public School System, backed by the Commonwealth Development Authority, finally sold $15.6 million worth of bonds, paving the way for the implementation of stalled construction projects for the education sector.

The bond will match the local requirements for the funding of projects under the Section 702 of the Covenant which has been derailed by cash shortage.

In a telephone conference held yesterday at CDA, executives from the Paine Webber and the California Financial Services confirmed the sale of the bond, ending two years of negotiations.

“It’s sold and the bond processing agreement is being prepared as we speak,” said Mark Adler, managing director of underwriter Pain Webber.

“It has been a difficult transaction but you guys are in a good position to sell your next bond,” added Michael Ogburn, California Financial Services, the financial advisory firm.

It was sold at a net premium that set the coupon value of the bonds at a higher rate and will earn the CNMI more than the principal amount of $15.6 million.

In an official statement prepared by CDA, Board chairman Juan S. Tenorio estimated around $497,000 in earnings from the premium selling.

“This amount will defray the payment made for the bond insurance premiums,” he said.

Although the invitation was repeatedly extended for the CNMI officials to fly to San Francisco for the signing of the documents, the Board of Education kept its previous plan to seal the agreement on Saipan because of the government’s austerity policy.

Adler and Ogburn, together with Betty Hanson, are expected to arrive on Saipan before May 25 to seal the Bond Purchase Agreement with Gov. Pedro P. Tenorio, BOE chairman Esther Fleming and the CDA chairman.

Tenorio reminded BOE and PSS officials that priority projects should start within six months after May 26, otherwise the lapse will defeat the purpose of the $15.6 million loan.

“The hardest part is finished but please start with your priority projects,” he said.

The Board earlier approved to share the $32 million package, which is now down to $30 million, among the three islands. Both Rota and Tinian will receive $3.5 million each, including matching funds.

For Saipan’s $23 million share, plans to build a new high school and junior high school are still being discussed with members of the community. Both projects were estimated to cost over $17 million, while the remaining money will be appropriated to build a school in Anatahan and other construction projects on Saipan.

The $15.6 million bond will be paid using the revenues generated from the local fuel tax. The Department of Finance will transfer $2 million each year to repay the loan.