CDA to float $60-M bond next month

The Commonwealth Development Authority will finally close next month the deal to float $60 million in municipal bond, which will be used to match federal funds for Capital Improvement Projects.

Executive Director Marylou S. Ada said the fact that investors are still interested to pour in money into the islands as indicated by the scheduled flotation of the municipal bond on Dec. 6, 2000 proves that business confidence in the CNMI continues to be strong.

“We are very fortunate that we were able to find investors who continue to believe in the Commonwealth’s economic potentials that they decided to buy the municipal bonds,” she said in an interview yesterday.

Considering that bond flotation is a very complicated and tedious process, Ms. Ada said the Commonwealth’s current financial situation made it even tougher for CDA’s United States-based underwriters to find buyers for the tax-exempt bonds.

“We have been very lucky and we are proud and happy to say that on December 6, the CNMI government in conjunction with CDA will float $60 million bond; this is good news to us because we find business people who are willing to invest in the Commonwealth despite our current financial situation,” she added.

Higher interest rates that prevail in the mainland U.S. and the CNMI’s economic situation delayed flotation of the $60 million municipal bond, which will be used to match available federal funds for several infrastructure projects in the Northern Marianas.

CDA earlier expressed optimism the bond will be sold in the U.S. market by middle of the year but underwriters decided to hold back in anticipation of lower interest rates in the next few weeks.

The government-controlled lending agency has originally stretched the expected time-frame for the flotation of the municipal bond up until October, when interest rates are traditionally lower.

CDA has been hard-pressed to double its efforts in getting a good deal for the $60 million bond amid the Commonwealth’s stagnant economy that is expected to recover at a turtle’s pace due to the continuing financial upheavals in the mainland Asia.

Flotation of the bond is expected to hasten pending major infrastructure projects and increase business activities on the islands, Ms. Ada said.

The municipal bond has been in the offing since last year but was not immediately floated due to economic difficulties and higher interest rates, resulting to the dragging completion of major infrastructure projects in the Northern Marianas.

The bond is being eyed for use to match available federal funds under the Section 702 of the Covenant, which guarantees U.S. funding for Capital Improvement Projects that can be tapped only if the CNMI identified local matching money.

The CNMI gets $11 million annually for CIPs. The $60 million bond has been identified to declog the bottleneck of unused CIP funds that has been accumulated by the CNMI.

In order to fortify the salability of the bond in the open market, Ms. Ada said government finance managers have looked at the stability of the Commonwealth’s fiscal house, particularly its ability to generate enough revenue and its capacity to reduce outstanding budget deficit.

Paine Webber, which handled the $16 million bond floated by the Public School System last year, handled the flotation of the $60 million municipal bond.

Half of the total $60 million bond proceeds will be used to pay the $30 million borrowed by the CNMI government from the Bank of Guam. The interim financing was decided by the CDA board to nourish the economy with infrastructure projects identified in the 702 CIP Master Plan.