The Government of Guam (GovGuam) proved again that Guam’s bonds are a sound investment for bondholders. The Guam Hotel Occupancy Tax (HOT) refunding bond sale last Friday exceeded all expectations in refunding the Series 2011 Hotel Occupancy Tax Bonds, with savings in the current fiscal year in excess of $3 million to be dedicated to Guam’s tourism recovery efforts as well as significant debt service savings over the next several years.
Amid the COVID-19 pandemic and its adverse impacts on hotel credits, Team Guam remained undeterred and committed two weeks to engage in investor calls to answer inquiries about Guam and the overall economy before the bond sale. As a result, GovGuam’s 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 Guam HOT bonds received a positive investor response which created an opportunity for Team Guam to lower the interest rates twice during the bond pricing process, going from an initial indicative pricing level of 3.42% to a final All in True Interest Cost of 3.23%. This overall effort allowed GovGuam 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, 2021.
“We are pleased with the results of the HOT Bond Sale as it provides significant savings over the life of the bond and fiscal resources for Guam’s tourism recovery. The tremendous response is evidence that bond investors are confident in the future of Guam and our ability to rebound after this global pandemic,” stated Governor Lou Leon Guerrero.
“Governor Leon Guerrero and I want to congratulate our fiscal team and the Guam Visitors Bureau on a job well done. The savings we will realize from this bond sale is part of the foundation for our recovery, and we are committed to continuing our efforts to rebuild a stronger Guam,” added Lieutenant Governor Josh Tenorio.
“The refunding of the HOT bonds is great news for our island and our number one industry,” said GVB Vice President Dr. Gerry Perez. “We look forward to dedicating the total savings realized from this transaction to aid in our economic recovery plans during this pandemic.
(Office of the Governor News Release)