Helping Aboriginal Communities Build Their Own Futures on Their. Presented to: CANDO Niagara Falls

Transcription

1 FIRST NATIONS FINANCE AUTHORITY Helping Aboriginal Communities Build Their Own Futures on Their Own Terms Presented to: CANDO Niagara Falls September, 2010

2 ALL REVENUE STREAMS AVAILABLE TO SUPPORT FNFA LOANS FSMA provides FNFA authority to borrow on the basis of two sources: 1. Other Revenues: Economic and Social Development, including Land purchases 2. Property Tax collected by First Nations: Capital Infrastructure to provide local services on reserve lands OBJECTIVE IS TO MAXIMIZE FN S BORROWING ROOM. 2

3 Maximizing Your Community s Borrowing Room REVENUES REVENUES - Property tax - Canada or Provincial Transfers - Contract Revenues - Royalties - Independent Power Projects - Gaming Revenues - Business Revenues PURPOSES: PURPOSES: - Capital infrastructure for provision of local services on reserve lands - Economic or Social development - Includes land purchases 3

4 PUBLIC PRIVATE PARTNERSHIPS AND THE THE FNFA Private Sector Joint Venture (e.g. IPP s, etc) % ownership % ownership First Nation Loan $ Loan $ BANKS FNFA 1. FNFA is mandated to provide equity loans. 2. To ensure loan repayment, FNFA secures the dividend payments from the Joint Venture to the First Nation. 4

5 FNFA A FNFA APPLIES TO ALL FIRST NATIONS First Nation Property Tax FSMA applies Other Revenues Other Revenues Reg. applies - Many First Nations will use both sides. - Single Debenture maximizes size, attracts investors, and lowers interest rates. FSMA Processes FNFA Board: Loan Approvals Single Debenture Other Revenues Reg. processes 5

6 WHY IS FNFA BENEFICIAL TO FIRST NATIONS (PART 1) Long Term Debt Example: FNFA FNFA receives Credit Rating Public Sector Loans Box 10 YR 20 YR LOAN LOAN FNFA LOAN RATE = 4.70% 5.10% First Nations = longer term loans = lower fixed rates = no need for collateral = FNFA is not-for-profit Banks FN: no credit rating FN Lending Criteria Box BANK LOAN RATE = 6.15% 7.10% = shorter term loans = higher non-fixed rates = need for collateral = for-profit motive FNFA SAVINGS = 1.45% 2.00% FNFA s credit rating will allow all FNFA borrowing members access to capital that is currently available to other levels of government of Canada. 6

7 WHY IS FNFA BENEFICIAL TO FIRST NATIONS (PART 2) LONG TERM DEBT EXAMPLE Using loan rates from previous slide, a First Nation can save the following interest with an FNFA loan vs. a Bank loan. Example: $10,000,000, loan Loan Rate Savings: Interest Savings with Loan Term is 10 years Loan Term is 20 years FNFA loan vs. a Bank loan FNFA loan vs. Banks 1.45% $1,450, % $4,000,000 i) Access to markets should also be emphasized unrated borrowers (First Nations) may be unable to borrow from Banks when economic upheavals occur (such as the Fall 2008). ii) While rated borrowers (Provinces, cities, FNFA) will find access to capital still available. iii) This availability to the FNFA means that every FNFA borrowing member will be able to receive financing when they want it! iv) FNFA s economies of scale (pooling First Nations financing demands into one large debenture) together with its credit rating will ensure a lower cost of borrowing for First Nations: i) Share rating agency costs, legal fees, promotional materials, etc... 7

8 Example: Short Term Loan WHY IS FNFA BENEFICIAL TO FIRST NATIONS (PART 3) SHORT TERM LOAN EXAMPLE FNFA is working with Canada to initiate its Short Term Loan Program. When this occurs, for the first time First Nations will be able to receive Short Term Loans below Bank Prime. (Currently Bank Prime = 3.00%). Loan Rate Savings: FNFA Short Term rate (rate fluctuates with ihprime) FNFA loan vs. a Bank loan 2.00% Banks Short Term rates to FN s (rate fluctuates with Prime) 4.00% Loans can be for up to 5 Years Loans can be for up to 5 Years i) By accessing the capital markets directly, the same method the Banks use to raise monies, FNFA will be able to lend to First Nations at rates below Bank Prime. ii) These below Bank Prime rates are currently enjoyed by Provinces and cities across Canada. 8

9 FNFA REFINANCING OF CURRENT BANK LOANS IS AN OPTION FNFA offers First Nations that become FNFA Borrowing Members the choice to refinance their current Bank loans. Refinancing has two advantages to a community: Firstly: the current Bank short term loan becomes longer term. FNFA loans = cash savings now! Secondly: FNFA loan rates should be lower than current Bank loan rates, and so further cash flow savings occur now! Longer term, fixed-rate loans = healthier First Nation s Budgets. = maximizes Capital Planning = job creation when projects begin. 9

10 FIRST NATIONS CAN CHOOSE LOAN TERM 15 yrs. = $ 99,941 each year How long can we take to repay? Answer: anywhere from 5 years to 30 years. You choose! 5 yrs. = $230,627 each year Example: annual principal plus interest on 10 yrs. = $133,291 each year $1,000,000 loan 20 yrs. = $ 83,582 each year 25 yrs. = $ 74,012 each year 30 yrs. = $ 67,830 each year Conclusion: you can choose a repayment term that keeps your budget healthy! 10

11 FNFA IS CONCLUSION: IS NEARING DEBENTURE ISSUANCE READY Staff: Board: (i) 20 plus years of actual debenture issuance, rating agency, and investor road show presentation experience (ii) 10 plus years experience as Tax Administrator (iii) Knowledge and experience as First Nations Council members and Senior Administrators (i) Chiefs and Councillors 11

12 FIRST NATIONS FINANCE AUTHORITY POOLED INVESTMENT FUNDS (PIF) 12

13 FNFA Pooled Investment Funds QUICK FACTS In operation since 1989 PH& N partners with RBC Investment Services fund manager Never had an investment write-down Open to First Nations, local governments in BC, schools, hospitals, universities, special purpose vehicles (not-for-profit). $2.27 billion under administration 13

14 Total Assets as of June 30, 2010 $67.5 Billion Multi Emp/Union 19.90% By Sponsor Corporate 35.80% Total Equity Specialty 10% By Mandate Public 17.7% University 6.00% Other 6.80% Insurance Co. Assets, 13.80% Total Balanced 34% Total Fixed Income Specialty 56% 14

15 3T Types of fi Investment tf Funds 1. Money Market Fund (Short-Term, 60 Days) 2. Intermediate Fund (Medium-Term, 1 to 2 Years) 3. Bond Fund (Long-Term, 3+ Years) 15

16 How is the FNFA Different? FNFA is not profit driven, no bonuses or cash incentives FNFA is owned and governed by First Nations Accounts can be setup within 24-hours and you don t need to visit a branch or location to do so No need to be scheduled to the FSMA legislation in order to invest with the FNFA Your money is there when you need it. Access is readily available. 16

17 FIRST NATIONS FINANCE AUTHORITY Performance Past 12 Months 1 Money Market Fund started in Intermediate Fund started in Bond Fund started in 1989 Money Market Fund (duration: One day to 91 days) Intermediate Fund (duration: up to two years) One Year % Since Inception % Withdrawal of Monies GROSS 0.60% 5.13% Everyday FEES <0.15%> <0.15%> without penalty NET 0.45% 4.98% 1 GROSS 1.56% 4.40% Every FEES <0.20%> <0.20%> NET 1.36% 4.60% 2 Wednesday without penalty Bond Fund (duration: 18 months up to 5 years) GROSS 4.55% 7.60% Every FEES <0.20%> <0.20%> Wednesday without NET 4.35% 7.40% 3 penalty 17

18 Pooled Investment Fund FNFA Security Monthly Reports Investing First Nation Electronic $ Transfer CIBC Mellon (Custodian) Notice of $ to invest Purchase Notice CIBC Mellon has two functions: 1) Protect your money 2) Verify the purchase PH & N (Fund Manager) Eligible Investments Investment Advisory Committee 18

19 Money Market Fund Current Structure As of July 30, 2010 Corporate Notes 74.0% Provincial 6.7% Federal Notes 19.3% Rating Analysis* AAA 69.0% AA 16.5% A 14.5% BBB 0.0% 100.0% Average Term: 60 days Yield: 0.57 % Average rating exceeds AA 19

20 Benefits of the Pooled Investments t By and for First Nations across Canada Excellent rates of return Security your money is safe and secure Flexibility investments can be made on an open-end basis Professional management Low management fees 0.15% for the Money Market Fund and 0.20% for the Intermediate and Bond Fund Easy access to your money 24 hour redemption for Money Market Fund 4 day redemption for Intermediate and Bond Fund Quick transactions through fax and phone Money Market Fund can be used like a bank account Receive monthly reports 20

21 How to Enroll In the Pooled Investments Give our staff a call or visit the FNFA website to print the documents. We would be happy to assist you in completing the forms! Steve Berna, FNFA Chief Operating Officer Dan McIntosh, Director of Communications Visit our website: 21

22 Overall Conclusion If your community has outstanding debt, projects, or financing needs, or; If your community wants to become part owner of an exclusively First Nations financial institution, give us a call. We are here to help your community prosper and thrive! First Nations Finance Authority Visit our website: 22