09 June 2014
The States of Jersey has today finalised its £250 million bond issuance. Following overwhelmingly positive feedback, the bond – a means of borrowing – attracted strong interest from investors.
A team from Treasury and Resources met potential investors over the course of a four day roadshow in Jersey, London and Edinburgh, and the bond was two and a half times oversubscribed before closure. This has enabled the States of Jersey to secure a low fixed rate of interest of 3.75% per year, with a final maturity of 40 years.
The proceeds of the bond will go into a ring fenced fund which will be lent to affordable housing providers in the island, including the newly created, government-owned, Andium Homes. These providers will then use the funds to finance a comprehensive programme of investment in affordable homes for Jersey’s future.
Treasury and Resources Minister Senator Philip Ozouf said “Jersey’s prudent approach towards the management of public finances has been rewarded with a very favourable spread over the 40 year Gilt rate.
“Jersey’s economic success story over many years has contributed to this result, through industries like agriculture, tourism and today through its position as one of the world’s leading finance centres. This is a reflection of the market’s demand for quality, which is what Jersey seeks to offer in every area of its activity.
“The long-standing partnership between Jersey and the United Kingdom has been a key factor in this successful issuance. We look forward to continuing to build stronger relationships with both the City of London and the wider financial community.”
Senator Ozouf said that funding the social housing programme through borrowing was part of a clear investment strategy which ensured that Jersey was using current conditions to its advantage. “We have secured finance for investment in social housing at a time when interest rates are historically low, which in turn allows us to maintain our reserves and achieve the best return on them. The net effect of this strategy is that we will be making more in interest on our reserves than we are paying in interest on the bond repayments.”
The syndicate managers that worked on the transaction at each of Barclays, HSBC and the Royal Bank of Scotland said "This was a great transaction to work on with the Jersey team. The strength of the Jersey credit was quickly recognised by investors who were impressed by Jersey's exceptionally strong balance sheet. The marketing process focused on discovering the clearing price for investors given that they were moving out of UK government guaranteed debt and more liquid credits.
“In the end, the pricing at Gilts +52 basis points represents one of the lowest new issue spreads ever achieved for a long dated, non UK-guaranteed Sterling transaction and positions Jersey with the cream of the sterling bond universe. I would like to thank the Treasurer, the Assistant Treasury Minister and the Treasury team for their hard work in securing this successful result.
“Jersey’s strong public finances have formed the basis for this bond, the proceeds of which will be used to secure a significant improvement in Jersey’s affordable housing stock, and to finance up to a thousand much needed new homes for Islanders.”
The decision to issue the bond was taken by the States as part of the 2014 Budget.