This chapter provides details of the Territory’s gross and net debt position, including disaggregation for the general government and public trading enterprise sectors.
There are no new general government sector borrowings projected during the 2000‑01 financial year.
In December 1999, Standard and Poors Australian Ratings affirmed the Territory’s long term rating at AAA and its A1+ short term rating.
The following table provides a breakup of the total debt owed to external entities, and principal and interest payments during the 1999-2000 financial year:
Table 5.1.1
Gross Debt 1999-2000
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Estimated Debt as at 1-Jul-99 $’000 |
Estimated Principal Repayments $’000 |
Estimated Interest Payments $’000 |
Estimated Total Payments $’000 |
Estimated Debt as at 30-Jun-00 $’000 |
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Commonwealth |
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ACTION (land and buildings) |
13 303 |
554 |
1 672 |
2 226 |
12 749 |
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Housing |
253 485 |
5 205 |
11 407 |
16 612 |
248 280 |
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ACTEW (water and sewerage) |
46 273 |
4 092 |
5 140 |
9 232 |
42 181 |
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General Purpose Capital Advances |
26 616 |
13 951 |
2 484 |
16 435 |
12 665 |
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Sub
Total |
339 677 |
23 802 |
20 703 |
44 505 |
315 875 |
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Borrowings
Managed By CFU |
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Inscribed Stock (1) |
118 184 |
- |
12 047 |
12 047 |
118 598 |
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Samurai Bonds |
71 092 |
71 092 |
1 431 |
72 523 |
0 |
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Domestic Retail Bonds |
55 000 |
- |
3 113 |
3 113 |
55 000 |
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Commercial Paper |
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-Refinanced Cwlth Debt |
15 004 |
3 737 |
1 562 |
5 299 |
11 267 |
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-ACTEW Borrowings |
- |
- |
- |
- |
300 000 |
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-Refinanced Samurai Bonds (2) |
- |
- |
2 003 |
2 003 |
71 092 |
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Sub
Total |
259 280 |
74 829 |
20 156 |
94 985 |
555 957 |
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TOTAL |
598 957 |
98 631 |
40 859 |
139 490 |
871 832 |
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-Off-budget Housing financing |
10 000 |
10 000 |
230 |
10 230 |
0 |
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TOTAL |
608 957 |
108 631 |
41 089 |
149 720 |
871 832 |
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(1) The increase of outstanding principal is due to the amortisation of the inscribed stock during the year. The original issue of inscribed stock was at a discount to the face value.
(2) Rollover of Samurai Bonds debt from November 1999.
The following table provides a breakup of the estimated total debt owed to external entities for the 2000-01 financial year.
Table 5.1.2
Gross Debt 2000-01
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Estimated Debt as at 1-Jul-00 $’000 |
Estimated Principal Repayments $’000 |
Estimated Interest Payments $’000 |
Estimated Total Payments $’000 |
Estimated Debt as at 30-Jun-01 $’000 |
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Commonwealth |
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ACTION (land and buildings) |
12 749 |
554 |
1 672 |
2 226 |
12 195 |
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Housing |
248 280 |
5 431 |
11 173 |
16 604 |
242 849 |
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ACTEW (water and sewerage) |
42 181 |
4 092 |
4 676 |
8 768 |
38 089 |
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General Purpose Capital Advances |
12 665 |
12 665 |
823 |
13 488 |
0 |
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Sub
Total |
315 875 |
22 742 |
18 344 |
41 086 |
293 133 |
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Borrowings
Managed By CFU |
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Inscribed Stock (1) |
118 598 |
- |
12 047 |
12 047 |
119 012 |
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Domestic Retail Bonds |
55 000 |
55 000 |
3 113 |
3 113 |
0 |
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Commercial Paper |
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-Refinanced Cwlth Debt |
11 267 |
3 737 |
1 167 |
4 904 |
7 530 |
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-ACTEW Borrowings |
300 000 |
- |
19 325 |
19 325 |
300 000 |
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-Refinanced Samurai Bonds (2) |
71 092 |
- |
3 889 |
3 889 |
71 092 |
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-Refinanced Retail Bonds (3) |
0 |
0 |
0 |
0 |
55 000 |
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Sub
Total |
555 957 |
58 737 |
39 541 |
98 278 |
552 634 |
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TOTAL |
871 832 |
81 479 |
57 885 |
139 364 |
845 767 |
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(1) The increase of outstanding principal is due to the amortisation of the inscribed stock during the year. The original issue of inscribed stock was at a discount to the face value.
(2) Rollover of Samurai Bonds debt from November 1999.
(3) Rollover of Domestic Retail Bonds debt from June 2001.
Total debt is forecast to reduce by $26.065m over 2000-01, largely attributable to the repayment of existing debt. The borrowing on behalf of ACTEW is matched by an equivalent receivable in the general government sector balance sheet and therefore has no impact on the net assets of the general government sector.
The level of debt owing to the Commonwealth as at 1 July 2000 will be $315.875m. By the end of the 2000-01 financial year it is estimated to reduce by $22.742m to $293.133m.
At 1 July 2000 historical ACTION debt will comprise $12.749m for land and buildings. At 30 June 2001 the obligation to the Commonwealth is estimated to reduce to $12.195m.
The ACT Housing Trust was aligned with the Commonwealth/State Housing Agreement on 1 July 1987. At that time a level of debt ($286.747m) was determined in relation to land and capital works relating to property transferred to the Trust under the Rental Housing Scheme and for the previous Commonwealth investment in the Home Purchase Scheme.
Additional advances totalling $14.100m were provided by the Commonwealth in 1988‑89 and 1989‑90. In 1990-91, capital advances to the states and territories for housing were discontinued and replaced by grants under the Commonwealth/State Housing Agreement.
As at 1 July 2000 the level of outstanding advances will be $248.280m. By 30 June 2001 the debt is estimated to fall to $242.849m. On 1 July 1998, the Home Loan Portfolio was transferred to the Office of Asset Management (now the Infrastructure and Asset Management Group) which will make direct payments to the Commonwealth for servicing the debt related to the portfolio. All other debt servicing charges related to the housing advances will continue to be paid directly from ACT Housing to the Commonwealth.
Upon the transfer of the water and sewerage functions to the then ACT Electricity and Water Authority on 1 July 1988, the relevant Commonwealth Ministers agreed to a level of debt ($91.287m) to be assigned to ACTEW. Annual debt servicing payments have been paid to the Commonwealth Government since the assignment of the debt.
The amount of debt outstanding at 1 July 2000 will be $42.181m. As at 30 June 2001 the obligation to the Commonwealth is estimated to be $38.089m. All debt servicing charges relating to the water and sewerage advances are paid directly by ACTEW Corporation.
General Purpose Capital Advances were provided to the ACT by the Commonwealth in 1988‑89 ($22.450m) and 1989-90 ($23.179m) on the same basis as advances to the States and Northern Territory. In 1990-91 advances were replaced by an addition to the ACT’s global borrowing limit. The advances are in the form of a number of Commonwealth Government securities which progressively mature until 2001.
Repayment arrangements in respect of the debt were agreed with the Commonwealth in 1991-92. The arrangements require that the Territory redeem the securities as they mature and meet the semi-annual interest costs as they arise. The Commonwealth will supplement the Territory for the additional borrowing cost that will be involved in refinancing the securities. The compensation is deducted from the redemption cost of the relevant securities. The outstanding advances at 1 July 2000 will total $12.665m. As at 30 June 2001 all outstanding advances will be repaid.
The Central Financing Unit is responsible for investing surplus funds of Government agencies and for centralising the borrowings of the Government. Three main sources of funds are currently managed by the CFU: Inscribed Stock issues in 1990-91 and 1995-96, a Domestic Retail Bond issue in 1997-98; and a $500m Commercial Paper Program providing access to short term funds.
In 1990-91 the Territory issued $87.500m (face value) of ten year term debt by way of private placement. During 1992-93, $20m of the 1990-91 issue, which was borrowed in excess of budgetary requirements at that time, was repurchased and the debt was cancelled. During May 1991 and January 1992, a series of interest rate swaps were undertaken to hedge $30.0m of the borrowings. The effect of the swaps was to provide a margin to the Territory on the transactions of 1.24%. This equates to an annual saving of approximately $0.372m. At 30 June 2000 an amount of $67.352m of this issue of ACT Inscribed Stock will remain on issue. It matures on 15 November 2001.
In 1995-96 the Territory issued $50m (face value) of ten year term debt by way of private placement. At 30 June 2000 an amount of $51.245m of this issue of ACT Inscribed Stock will remain on issue. This matures on 15 July 2005.
During 1996-97, more favourable interest rates off-shore than domestically, provided an opportunity to refinance outstanding borrowings from 1994-95 and 1995-96 ($71m). These borrowings were refinanced by way of a Samurai Bond issue into Japan. The issue of Samurai Bonds was achieved with a saving of 20 basis points (0.20%) on domestic borrowing rates. This equates to an annual saving of approximately $0.143m. Prior to this the debt was funded through the ACT Commercial Paper Program. The bonds matured on 29 November 1999. The estimates provide for the debt to be rolled over using commercial paper. During 1999-2000, further options will be explored for refinancing this debt at competitive rates.
During 1997-98, new borrowings ($55m) were undertaken by the CFU and on-lent to ACTEW Corporation. The Commonwealth Bank of Australia (CBA) was mandated to arrange and manage the bond issue following a selective tender process. The borrowings were funded by way of a domestic retail bond issue. The term of the borrowing is three years with a maturity date of 19 June 2001.
In 1991-92 the Territory borrowed $43m by way of its Commercial Paper Program to refinance the historical plant and equipment debt owing to the Commonwealth. This debt was owed to the Commonwealth at fixed interest rates of 11.45% and 12.57% (an average of 12.01%). The refinancing structure involves the use of a component of the Commercial Paper Program until 2002‑03 and an amortising interest rate swap. The structure has effectively reduced the fixed interest rate cost from 12.01% to 10.34%, a saving of approximately $4.100m over the life of the loan. At 30 June 2000, approximately $11.267m will remain on issue.
During 1999-2000 additional borrowings will be raised by the most beneficial means available at the time. It is likely that the borrowings will be initially funded from the ACT’s Commercial Paper Program. An estimated $300m will be borrowed on behalf of ACTEW Corporation.
Also during 1999-2000 general government borrowings previously funded from a Samurai Bond Issue matured. These borrowings have been refinanced using Commercial Paper until other borrowing options are explored.
During 2000-01 no new borrowings are required. However, borrowings undertaken on behalf of ACTEW Corporation in 1997-98 through a Domestic Retail Bond issue will mature. These borrowings will be refinanced using Commercial Paper until other borrowing options are explored.