Guam saves $19 million from bond refunding

The governor of Guam has announced that the territorial government will save $19 million, including $3 million during the current fiscal year, from refinancing 2011 Hotel Occupancy Tax bonds.

The savings from the March 19 bond sale will be dedicated to Guam’s tourism recovery efforts as well as debt service, Guam Gov. Lourdes Aflague Leon Guerrero said in a Tuesday press statement.

The bonds originally were sold in 2011 to refinance an existing 1997 infrastructure bond and to provide additional funding for tourism-related projects, the Pacific Daily News reported.

Savings from the bond refinancing mean more fiscal resources for Guam’s tourism recovery, Gov. Lou Leon Guerrero said.

Leon Guerero also testified Wednesday at a live-streamed hearing of the House Natural Resources Committee about the territory’s significant needs for federal support.

She highlighted the island’s vulnerability to the effects of climate change and its infrastructure needs.

The island has lost about one-third of all live corals on its shallow reefs since 2013 and is expected to experience annual severe bleaching events by the middle of the century that will be compounded by sea-level rise, she said. In addition there are threats to freshwater supplies from rising temperatures, and more severe typhoons stemming from climate change.

Although the recently enacted $1.9 trillion stimulus makes Guam families eligible to apply for an enhanced child tax credit, they remain ineligible for Social Security’s SSI program for the disabled even though residents of the neighboring Northern Mariana Islands qualify.

That could change in the coming year because the U.S. Supreme Court has agreed to consider oral arguments in an SSI case involving Puerto Rico that could have repercussions on Guam.

U.S. citizens living in the territories of Guam, Puerto Rico, American Samoa, and the U.S. Virgin Islands are excluded from receiving SSI benefits.

In the meantime, the island’s bond refinancing is expected to provide some immediate help.

In Tuesday’s press statement, the governor said HOT Refunding Bonds Series 2021A received strong investor demand with $1.06 billion in total orders placed by 24 different investors. Of those investors, ten firms placed orders for the entire series of bonds.

The press statement said that the initial pricing of 3.42% fell to a final true interest cost of 3.23%.

That enabled the government to refund $72.3 million in existing bonds with $58.9 million of refunding bonds, a net present value savings of $19 million.

The HOT Bond closing is scheduled for the late hours of March 31.

“We are pleased with the results of the HOBond Sale as it provides significant savings over the life of the bond and fiscal resources for Guam’s tourism recovery,” the governor said. “The tremendous response is evidence that bond investors are confident in the future of Guam and our ability to rebound after this global pandemic.”

Guam’s Lt. Gov. Josh Tenorio said the savings from the bond refinancing “is part of the foundation for our recovery, and we are committed to continuing our efforts to rebuild a stronger Guam.”

Guam Visitors Bureau Vice President Gerry Perez described the refunding as “great news for our island and our number one industry.”

“We look forward to dedicating the total savings realized from this transaction to aid in our economic recovery plans during this pandemic,” Perez said.

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