First Nations bands and governments who are party to the First Nations Finance Authority are about to make a sell-off of between $100-150 million of their debt in the form of 10-year bonds to institutional investors this coming February 2014.
The debt sale comes a decade after the Canadian government passed legislation authorizing such a program.
Moody’s, one of the three major rating agencies in the world, assigned the Authority with an investment grade rating of A3, which is nowhere close to the top ratings, but basically means relatively safe to invest in and likely enough to meet its payment obligations. Currently, the Bahamas and Malaysia hold A3 ratings, as well as JPMorgan and Goldman Sachs.
While the organization is mostly composed of representatives of northwest coast Onkwehon:we bands or governments, according to the website of the First Nations Finance Authority, “any Aboriginal government in Canada, including those operating under self-government regime or treaties” can join the organization and get access to loans with up to 30 years to repay. The loans are available at or close to rates secured by provinces and territories.
While the move is being billed as allowing for greater financial autonomy, the debts are being backed by revenue from local sources, such as property taxes and resource royalties. In other words, Onkwehon:we resources and the budgets of their communities are being put up as collateral for the investments and loans being taken out by Indian Act bands or local self-government officials.