Jun 2008 Financial News

Govt to issue $1.2b bonds...to absorb excess liquidity from RBTT sale

Jun 16, 2008

Bonds worth an initial value of $1.2 billion are to be issued immediately by the Government, as part of its plan to "mop up" the excess liquidity that will be placed into the economy when RBTT shareholders receive $4.7 billion in cash as part of the bank's acquisition by the Royal Bank of Canada (RBC).

In making the announcement yesterday, Finance Minister Karen Nunez-Tesheira revealed that Government plans to bring new legislation in Parliament to raise its borrowings ceiling by an extra $8 billion, under the act she said will govern the bond issue.

"Given the immediate liquidity absorption requirements associated with the RBC/RBTT transaction, the Government is of the view that the ceiling of Government borrowings under the Development Loans Act, Chapter 71:04, should be increased to TT$20 billion from the current limit of TT$13 billion," Nunez-Tesheira said.

In doing so, she noted that the economy's current disposition, as it relates to inflationary pressures, will be exacerbated by the one-off impact of the RBC/RBTT transaction, despite this country's buoyant economy.

Nunez-Tesheira said while both imported inflation due to rising food prices, as well as high international oil prices are major contributing factors, the rate of inflation, which stood at 9.4 per cent in April, is also being driven by consumer spending.

"This, together with rising prices, has contributed to an increase in credit card spending. For the year ending February 2008, bank credit increased by approximately 23 per cent," she said.

The RBC/RBTT transaction is due to be completed within the next few weeks and Nunez-Tesheria said it is expected to be accompanied by a significant expansion of domestic liquidity.

"This is because the acquisition of the cost of the RBTT shares, which amounted to US$2.2 billion or TT$13.8 billion, is to be settled partly in RBC shares and partly in cash. Of the amount to be received in cash, approximately US$750 million is to paid in local currency amounting to approximately TT$4.7 billion," she said.


Source:
Juhel Browne jbrowne@trinidadexpress.com
Daily Express
Saturday, June 14th 2008

http://www.trinidadexpress.com/index.pl/article_business?id=161339099