Province Raises $270 Million

The Province of Nova Scotia continues to reap more benefits from low interest rates and good financial management.

Last week, the Department of Finance was able to add on to an existing 30 year long-term bond in Canadian funds at an effective cost of 5.95 per cent.

The original bonds were issued last September in the amount of $300 million. Last week's issue raised an additional $270 million, although the additional principal amount to be repaid is only $250 million.

The $20 million premium paid by the market means the effective interest cost to the province is less. The total amount outstanding on the issue is $550 million.

Finance Minister Don Downs said, "I believe the low interest cost reflects the financial market's confidence in Nova Scotia, and our continued commitment to good financial management."

The $270 million net proceeds of this transaction will be used to pay off existing financial obligations as they come due. This is only the second 30 year fixed-rate borrowing done by the province since 1992.

Mr. Downs said, "Our strategy is to take a balanced approach. In recent years the province has taken the same course many homeowners have taken. When short-term rates were low, the province borrowed money for a short-term, or floating rate. But, now that long-term interest rates are at historic lows, we decided it was time to lock-in part of the mortgage."

The drop in long-term rates since the fall has been significant. When the first part of the issue was sold last fall, the effective cost to the province was the same as the coupon rate, 6.6 per cent. Because of the premium paid by the market, the effective total cost to the province on the second part of the issue was approximately 5.95 per cent.