GWA, GEDA refinance 2005 bond - KUAM.com-KUAM News: On Air. Online. On Demand.

GWA, GEDA refinance 2005 bond

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 by Sabrina Salas Matanane

Guam - It's yet another example of Guam bond's making an impressive showing on the municipal market. Matter of fact a deal an ocean away brings more good news here at home.

As part of it's stipulated order nine years ago the Guam Waterworks Authority borrowed over $100 million to make massive improvements to the island's water and waste water systems. "It financed the repair of the Agana and Northern Waste Water Treatment Plants it provided meter money it provided other capital improvements that we've been benefitting from since 2005," said Simon Sanchez, chairman of the Consolidated Commission on Utilities.

In New York today, all it took was a half hour to create $14 million in savings for ratepayers. According to Sanchez, GWA and the Guam Economic Development Authority were successful in refinancing their 2005 bond. "It's closer to about $80 million we've paid off some principal  but we were able to lower the interest rate quite significantly it was 5.6% in 2005 and were able to lower it to 4.3%, so saving almost 1.5% in interest," he said.

Almost immediately the $85 million bond issue was oversubscribed with several firms each placing orders for over $30 million. Of note was the fact that several firms that had not previously invested in any Guam credit entered into the bidding for GWA's bonds. "We had tremendous interest in this borrowing  while we were only trying to borrow $70 million there was over $700 million worth of offers 10 times more than we needed," he added.

Today's transaction follows national media such as Bloomberg reporting that the biggest returns in the municipal market are coming from Guam. Bonds have surged 10% in 2014 "that's better than all states and fellow US territories Puerto Rico and the Virgin Islands."

Sanchez said, "They really view Guam's bonds as good value they're going to get repaid triple tax exempt so all in all everybody got a benefit the bond holders are happy they got a reliable investment and most importantly Guam's ratepayers are going to save $14 million in the coming years."

Sanchez adds although ratepayers will not see an immediate reduction in their water bills, the savings will be realized over the long term starting in.

"By then you're probably going to see a 3% or 4% drop in your rates then and then in 2033 we will actually pay off this loan saving two years of debt service so that's another 5% or 7% in the 2030's we wish like anyone we'd love to accelerate it sooner but if you do it sooner then you reduce the amount of savings for the entire community and you reduce it for the life of the loan the PUC consultants really wanted to maximize the saving for the ratepayers and while we did too we would have preferred to move it up a little more but that was the compromise between the PUC consultant and us and it did maximize over the next 21 years it's the most savings we could get," he said.

The closing for the bonds is expected early next month.

Reacting to the news Governor Eddie Calvo says his fiscal team has been working diligently with GWA to proactively seek out investors and advocate GWA's tremendous fiscal and operational improvements which led to a strong A-rating by Standard & Poors late last year. The governor added that the turnaround with GWA is not unlike that of the Government of Guam as a whole under his administration. He is excited that our marketing efforts have proven highly successful for GWA and for its ratepayers.

He said, "The savings are particularly helpful in reducing debt service in years where it will benefit ratepayers most and also by reducing the final year's debt service by almost a full year. These are tremendous accomplishments and I congratulate GWA and my entire Fiscal Team for bringing such relief to the ratepayers of Guam."

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