Guam Water Agency Plans Sale of Market-Beating Debt

Guam’s water agency is selling as much as $90 million of bonds this week as debt from the U.S. island territory beats the municipal market by the most since at least 2001.

Guam Waterworks Authority plans to issue the securities to refund revenue bonds, said Lester Carlson, public finance manager for the Economic Development Authority. Guam’s first issue of 2014, set to price as early as tomorrow, is expected to save about $6 million, Carlson said.

“Any time that we have an opportunity to refund and give ratepayers some relief, we feel that it’s thoroughly incumbent upon us to take advantage of opportunities such as this,” Carlson said. “This is why we’re here.”

Guam’s debt, which is tax-free throughout the U.S., has climbed 10 percent this year, the most among states and territories, including Puerto Rico, and is beating the 6 percent gain in the $3.7 trillion muni market by the biggest margin since at least 2001, Barclays Plc data show.

Guam’s debt is meeting investors’ search for yield. The Pacific island offers the same tax advantages as Puerto Rico, a territory whose fiscal struggles have sparked default concerns. Guam, whose economy grew 24 percent in the five years through 2012, boasts a $2.3 million surplus for the year through September 2013, Governor Eddie Calvo said this month.

Different Territory

“While we empathize with the situation in Puerto Rico, we are two totally different economies,” Carlson said. “We’ve never defaulted.”

About $72 million of the Guam authority’s refunding is tax-exempt, and about $15 million is taxable, Carlson said. The borrowing will refinance 2005 bonds that were used for projects including repairs and renovations to the wastewater system and improvements to the distribution center, Carlson said. Moody’s Investors Service ranks the debt Ba1, the highest junk grade.

The longest-maturing Guam Waterworks Authority bonds, which are due July 2043, traded July 15 with an average yield about 2.1 percentage points more than benchmark munis, data compiled by Bloomberg show. That’s the smallest penalty in about a month.

Guam joins issuers from Maryland to Texas offering about $5.5 billion in debt this week, down from $5.9 billion last week, according to data compiled by Bloomberg.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Schoifet, Alan Goldstein

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