Vindicated! - by Colville Mounsey October 24, 2019

Government’s was vindicated in its decision to pay the London-based consultancy firm, $27 million to negotiate this country’s local and foreign debt. This is the position of Minister in the Ministry of Finance Ryan Straughn even as he revealed this afternoon that the Barbados External Credit Committee did not represent the entirety of the external debt stock.

Straughn contended that given the fact the country was saving a billion dollars per year in the just negotiated deal “in principle” with the Barbados External Creditor Committee, the concerns about the high fees to the firm, which were swirling in the public domain for almost a year, were shown up to be unfounded. Straughn also put on record his expectation that Barbados’ international credit rating would go up as a result of the deal.

“Considering that we have been saving over a billion dollars per year on a debt, which prior to us coming to office, was creating a significant stranglehold on the backs of Barbadians, I think it is money well spent… I think that the work that they have been able to deliver on behalf of the people of Barbados, given the circumstances, is definitely worth it. In life you have to spend money to get things to happen and I am confident that the decision to go in this direction has borne fruit already,” he said during a post-Cabinet press briefing at Government Headquarters.

However, when asked by Barbados TODAY to quantify just how much of the foreign debt stock the Barbados External Creditor Committee represented, Straughn said it accounted for a “significant portion” of the debt.

“To the extent that the securities that were outstanding in the market in terms of the ownership, the committee represented a significant proportion of the holdings of those securities and therefore as was the case with the domestic side, we held those discussions based on the holdings of the securities. So therefore whilst they did not represent a hundred per cent of the entire debt stock, they represented a significant proportion,” said Straughn.

He further explained: “We had a US$150 million that was due on December 2021, we had US $220 million due in August of 2022, $119 million due in 2035 and then the Credit Suisse which was $225 million. The threshold with respect to what the Credit Committee held on that was about 60 per cent of that. We have had discussions with others along the way and so therefore the meeting of the threshold in terms of the agreement in principle will allow us to be able to carry forward the exchange offer in terms of what we have agreed,” said Straughn.

He further revealed that not yet in the negotiations were some debts related to Transport Board, Barbados Investment Development Corporation (BIDC) and the Barbados Agricultural Development and Marketing Corporation (BADMC).

“We rolled everything up into this structure as we re-issue the new debt. So whilst the foreign debt that were due to expire in 2021 and 2022 were held exclusively by the creditor committee as well as the Credit Suisse loan, there were a few smaller issuances to the BADMC and BIDC which rolled into that debt stock to fully restructure and therefore we anticipate that we should be able to be in a position to execute that exchange offer as soon as the resolution passes Parliament,” he explained.

The Minister also took the opportunity to respond to concerns raised by Director of the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) at the Cave Hill campus of the University of the West Indies, Dr Don Marshall, who called some of the deal’s terms invasive.

Marshall was referring to the clause providing for the reinstatement of forgiven principal and past due and accrued interest if Government defaulted on payment before the successful completion of the ongoing International Monetary Fund (IMF) programme. He contended that this essentially removed Government’s ability to renegotiate terms with the IMF, should for example, the determination be made that the social ramifications were too onerous.

However, Straughn argued that the exact clause was also enshrined in the deal struck with the local creditors and questioned why Marshall would raise this concern at this juncture and not before.

“It is interesting that it is raised because the same clause applies to the domestic debt. So we have given a commitment to our creditors because in each case they have all taken haircuts on both principle and interest. We did it for the domestic and we are now doing it on the external. So it is interesting that it was described as invasive and that perhaps because this time it is on the foreign side,” he said, noting that much more details of the offer would be released in Parliament on Tuesday.
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