Minister Straughn highlights terms of debt exchange
MINISTER in the Ministry of Finance, Ryan Straughn, gave a comprehensive look at the terms and conditions of the debt exchange as he led off debate in the Lower Chamber recently.
He was speaking under Section 3 (1) of the External Loan Act Cap 94D, which included the borrowing in the form of the issuance of two new series of sums of up to US$580 million with the Bank of New York Mellon Corporation and the establishment of a sinking fund for the redemption of each issue of securities made under the said Act and for the monies necessary to maintain and service that fund.
Straughn told the Lower Chamber: “We shall be issuing two instruments. One US dollar, 6.5 per cent bond due in 2029, which is referred to as the 2029 Bonds and one US dollar, 6.5 per cent bond due in 2021. The bond that will be issued, which is a ten-year bond until 2029, is up to US$547 million.
“The second bond is the past due interest bond because as you are aware, when we suspended the debt payments in June 1, we stopped paying the interest on the external debt and therefore, between then and the end of September interest would have accrued.
“Therefore, we have designed two specific bonds; this second one will pay the interest that would have accumulated over the last 16 months and this is what this specific bond will do and that is up to US$32.5 million.”
The first bond is October 1, 2029 and the second bond which is the past due interest bond, the maturity date is the February 1, 2021. “For both bonds, Sir, the interest rates, as I mentioned earlier, 6.5 per cent. Just to remind the Chamber that the Credit Suisse bond that was previously on the market, in a sense was trading at just short of 13 per cent as far as the interest rate is concerned.”
Minister Straughn clarified that four large bonds were rolled into one. “Initially we had a US$150 million bond at 7.5 per cent when it was originally issued. That bond was due on December 15, 2021. We had a US$200 million at 7 per cent that was due on August 4, 2022; we had a US$190 million when it was issued at 6.625 per cent, that was due in December of 2035. The Credit Suisse, which was borrowed in 2013, that was US$225 million; that was due to mature in 2019, but that was the bond, Sir, that was being graded at close to 13 per cent that created the issues with respect to where we are,” he told the Honourable Chamber.
“What we have done is rolled that quantum as debt as well as a few smaller debts to restructure that into this structure, which will be reissued as one of up to $547.5 million.”
As far as interest payment dates, Minister Straughn stated they will be made April 1 and October 1 each year with respect to the bonds.
He stressed that an important feature for the 2029 bond in particular, is that there will be amortisation.
“We have amortised these bonds and the amortising for the 2029 Bonds, Sir, will be in ten equal semi-annual payments from the April 1, 2025 through to October 1, 2029. Which means, Sir, we have a grace period between when we issue these bonds and when we will be required to do the amortisation with respect to the bonds.
“As far as the past due interest bonds, two instalments of US$30 million on October 1, 2020 and a remaining US$2.5 million on February 1, 2021.”
He said these are some of the steps intended to bring to a close this part of the adjustment in order to deliver a recovery for Barbados.