Government’s move to pay its external creditors will signal to investors that they can be confident in doing business with Barbados once again.
That is according to Minister in the Ministry of Finance Ryan Straughn, who today moved the passing of a resolution in Parliament to restructure the country’s foreign debt.
In revealing the details of that restructuring process, Straughn said those debt negotiations had been completed two weeks ago while he was in Washington and the trustee was the Bank of New York Mellon Corporation
He said this was critical if Government wanted to build investor confidence in Barbados.
Government suspended payment to its external creditors on June 1, 2018, in an attempt to save the country’s dwindling foreign reserves.
The Minister disclosed that because of the negotiations, the interest rate on the $450 million Credit Suisse loan had been slashed by almost half.
“Therefore this restructuring allows us to move that interest rate from almost 13 per cent to 6.5 per cent. It is still a relatively high interest rate, but that is part of the negotiating because now it means that the nature of the expense with respect to any company that wants to do business in Barbados, the resolution of this exchange offer will allow for companies to be able to attract better rates of interest so that as we move forward into 2020 we will start to see the unlocking of foreign direct investment as well as local companies being able to secure financing whether regionally or internationally, such that this economy will start to see things starting to unwind, and that is what we said we will do,” Straughn stated.
The Minister disclosed that Government would be issuing two instruments; 2021 bonds and 2029 bonds.
Straughn said both bonds had interest rates of 6.5 per cent.
Straughn explained that due to the suspension of debt payments on June 1, interest had been accrued. He said two specific bonds had been designed to repay the interest which had accumulated over the last 16 months.
“The bond that will be issued, which is a ten-year-bond, until 2029 is up to US $547 million, while the second bond is the past due interest bond…and that is up to US $32.5 million,” he noted.
He said the maturity date for the first bond was October 1, 2029, while the past due interest bond would mature on February 1, 2021.
Additionally, Straughn said Government had also taken the decision to “wrap four bonds into one instrument”.
He said initially there was a US $115 million bond at 7.5 per cent which was due on December 15, 2021; a US $200 million at 7 per cent that was due on August 4, 2022; a US $119 million at 6.625 per cent due in December of 2035 and the Credit Suisse which was borrowed in 2013 that was US $225 million that was due to mature in 2019.
“What we have done is to roll that quantum of debt, as well as a few other smaller debts to restructure that into this instrument that will be reissued as one of up to $547.5 million,” he said.
He said interest payment dates were on April 1 and October 1, of each year.
Straughn said one of the important features of the new 2029 bond was that there will be amortization over the course of the ten years.
He said this meant Government would have a “grace period” as the bonds would be paid in 10 equal semi-annual payments from April 1, 2025 through to October 1, 2029.
Straughn said the past due interest bonds would be paid in two installments of US$30 million on October 1, 2020 and the remaining US $2.5 million on February 1, 2021.
He said Government would also be making a cash payment of US $7.5 million to be paid at the close of the holders participating in the exchange.
The Minister revealed there was also an adverse weather clause similar to the one included in the local debt restructuring, where the bonds would include a two-year grace period on principle and interest in the event that Barbados was impacted by a severe hurricane or environmental disaster.