Some have done well from bond
MUCH has been said about the burden placed on island taxpayers by the creation of the Guernsey £330m. bond. Not much has been said about who has done well out of it. Clearly some organisations and individuals did very well out of the £14.6m. which disappeared in up-front costs. There are others that have done very well and continue to do so.
In the setting up of a bond some judgements have to be made. One important judgement is how attractive the bond issuance should be. Not attractive enough and take-up will be poor with the managing banks left with unsold bond stock. Too attractive and everyone wants to grab it, causing it to be oversubscribed. Excessive buying demand points to a bad deal for the issuer. News at the time said the Guernsey bond was heavily oversubscribed. After issue the market price quickly went to a substantial premium. Secure income, at 3.375% for 32 years, was seen as a present from heaven by pension fund managers and others. Very clearly the issue terms were badly judged or, if one is a conspiracy theorist, it was set for the benefit of the buyers and the comfort of bankers. The KPMG Guernsey Bond report showed initial buyers bought bond pounds for slightly under 99p. The same report shows the States of Guernsey paid £802,758 for advice, but oversight, control and foresight didn’t work.
Moving forward to the present, who is now doing well out of the Guernsey Bond? A lot of searching on the internet did not find a market price. However, with the help of Guernsey’s Freedom of Information facility we now do have some recent market prices of the Guernsey £330m. bond. It is there for everyone to see at https://www.gov.gg/information, listed under year 2020 (prices quoted are lots of 100). At the end of 2019 the Guernsey Bond was £1.25 and at end of July 2020 it was £1.42. The important point to note is that the price has been and is at a substantial premium. So now, think what it would cost to end Guernsey’s ill-fated bond liability, buy the lot back, oh dear, no don’t think about it.
So, the lucky bond holders that bought bond pounds for 99p are now holding bond pounds worth about £1.42 and have been receiving income at 3.375% per annum as well. Happy bond holders can sell at a profit or carry on collecting the coupon of 3.375% up to 2046 and then will receive their pounds back, whole pounds that is. All of this has the good wishes and cheer of those deputy candidates backing a continuation of the current leadership.
HENRY LANCASTER,
Elsinore,
Ville es Pies,
Vale.