Almost a year after signing a contract, Government is sticking to its guns when it comes to the millions of dollars that will be paid out to the London-based firm, White Oak, for its consultancy services.
In fact, Government has flatly rejected the latest claims that the payment was “absurd”, saying the latest round of criticisms were aimed at creating a distraction.
“This story is intended to distract and distort in order to put pressure on the Government to cave in during the negotiations to restructure the foreign debt, and is clearly timed to coincide with the presence of the IMF Mission being on the island at this time. It will not work,” said the statement, which was issued by Press Secretary to the Prime Minister Roy Morris.
He was responding to an article published by the London-based Financial Times, which quoted an Atlanta-based portfolio manager at Invesco, who is also a member of the external committee of creditors, as saying that the fee being paid to White Oak is “absurd given the size of the debt”.
The article went on to make comparison of the Barbados debt situation and the cost to White Oak, to the cost of restructuring Jamaica’s debt and that of Belize, which it said were in “single digit millions”.
It was immediately after coming to office at the end of May that Prime Minister Mia Mottley announced the suspension of all debt payments.
So far, local creditors have accepted a Government debt swap offer, which includes lower interest rates and a longer period over which they will be paid.
Government has put forward a similar offer to holders of US dollar Barbados bonds, but they have flatly rejected it, and have put forward their own proposal. Government is still struggling to conclude a deal.
According to the contract between Government and the company, US$85,000 would be paid per month to retain the services of White Oaks, meaning it would earn US$1.02 million in retainer fee per year.
The document, which was laid in Parliament earlier this year, is dated May 30, 2018 and shows the signatures of White Oak Managing Director Sebastian Espinoa on behalf of White Oak Advisory Ltd and that of Barbados’ Director of Finance, Economic Affairs and Investment Ian Carrington, on Government’s behalf. Carrington signed on June 18.
In the statement today, Government said the contract was laid in Parliament several months ago in keeping with its commitment to “full transparency”.
“The Government has also made it clear, on and off the floor of Parliament, that the savings that have come to the country amount to $99.55 out of every $100 of debt restructured. In other words, it is only paying 45 cents for every one hundreds dollars saved from the debt restructuring,” said Morris.
“This amounts to more than $1 billion in savings per year for each of the next three years and beyond,” he added.
Under the contract, Government would incur a number of charges.
In consideration of the advisory services, the document stated, “The Government shall pay White Oak fees comprising: a monthly retainer of US$85,000, payable by monthly installments in arrears. This retainer will commence on May 30, 2018.”
It went on to explain that Government would pay a success fee “payable in US dollars of 45 basis points (0.45 per cent)” on debts owed by the Government and its public sector that are “denominated in currencies other than the Barbados dollar and that are reprofiled, restructured, cancelled, redeemed, repurchased, refinanced, exchanged, and/or the terms of which are amended, other than debts owed to official bilateral creditors”.
Under the contract, Government would also be required to pay 40 basis points (0.40 per cent) “on the principal amount of, and any accrued but outstanding interest” on Barbados dollar denominated debts owed by Government and its public sector, that are, redeemed restructured, cancelled, reprofiled, refinanced, repurchased exchanged, “and/or the terms of which are amended, other than debts owed to official bilateral creditors”.
It also spoke of a success fee payable in US dollars of 20 basis points or 0.20 per cent to be charged on the principal amount of any “non-debt domestic arrears” that are resolved.
However, in a subsequent “side letter” addressed to the Director of Finance, Economic Affairs and Investment, dated August 21, 2018, White Oak referred to the engagement letter, saying it agreed to waive the success fee stipulated in section 3 (d) of the agreement relating to the resolution of non-debt domestic arrears.
“It is understood that all other terms and conditions in the original agreement, including all other fees and amounts due to White Oak under the original Agreement, remain effective and that references to the Agreement therein shall be deemed to include this letter,” it added.
The original agreement also noted that Government would be responsible for its own legal fees and the costs of its other advisors.
The invoices to White Oak are payable by Government within 15 business days of the billing date, with some exceptions.
White Oak has been acting as the external financial advisor to the Mia Mottley-led administration since some time in May last year.
“Our primary focus has been advising on the Government’s debt restructuring, although we are also assisting with a number of other financial issues relating to the implementation of the BERT (Barbados Economic Recovery and Transformation) plan,” Managing Director Espinosa told Barbados TODAY back in February, while opting not to confirm if White Oak would provide service over the life of the four-year BERT programme.
However, the document showed that either party “may terminate this agreement at any time subject to 30 days’ written notice”, and added that termination or expiry would not affect any legal rights or obligations that may have already accrued to either party.
Among its scope of work, White Oak would design a work programme to help guide and support Government’s efforts to resolve the country’s structural debt and arrears problems by providing a range of services including the gathering and analysis of data.
The company would also provide advice, including ensuring that the design of an International Monetary Fund (IMF) programme, if applicable, was “compatible and supportive of the selected debt restructuring strategy”.