Jamaica
This article was added by the user . TheWorldNews is not responsible for the content of the platform.

Jamaica raising new debt on global markets, to pay down bonds worth US$1.7b

It forms part of steps to methodically reduce the island’s debt burden by swapping old bonds for new and presumably less expensive issuances.

The Government plans to list the new bonds in Europe on the Euro MTF Market of the Luxembourg Stock Exchange, the Ministry of Finance said in a filing alerting the global market of an impending offer.

Existing bondholders within three specific notes maturing in 2025 and 2028 totalling US$1.76 billion can opt to cash out their bonds. Participating bondholders will receive cash for their notes by early November.

The amount represents nearly 13 per cent of Jamaica’s total debt stock, which stood at $2.15 trillion at July or about US$13.8 billion. Factoring the external debt alone, the value of the three bonds is equivalent to 21 per cent of the foreign stock.

The net effect on the total debt is unknown as the Government is yet to disclose the quantum it wishes to raise in its new bond offering, said the head of a local securities dealership who spoke on condition of anonymity.

Messages and emails sent to the Ministry of Finance and Finance Minister Nigel Clarke were unanswered.

“... As described in the ‘use of proceeds’ some of the net proceeds of this offering are intended to be used to fund Jamaica’s purchase of certain outstanding notes of Jamaica ...,” stated the prospectus issued by the Ministry of Finance’s Debt Management Unit. As is standard procedure with market alerts for pending offers, the dates and amounts for the fundraise were not included in the filing.

The old notes set for cash payout include two notes due 2025 amounting to US$254 million priced at 7.625 per cent, and US$85.2 million at 9.25 per cent. The third note due 2028 has US$1.42 billion outstanding and is priced 6.75 per cent. The invitation to cash out the old notes commenced last Thursday and expires this Friday, October 27.

“The settlement of validly tendered and accepted old notes is expected to occur on Thursday, November 2, 2023,” according to a general notice on the offer.

Citigroup will act as the global coordinator. The joint lead managers and joint bookrunners are Citigroup and BofA Securities. Additionally, Deutsche Bank Luxembourg has been appointed as the Luxembourg paying agent.

It is unknown what interest rates the new bonds will come attract but Jamaica will have improved prospects based on the recent rating upgrades. In September, S&P Global upgraded Jamaica’s debt from ‘B+’ to ‘BB-’ and affirmed Jamaica’s outlook as “stable”; then on October 19, Moody’s rating agency upgraded Jamaica’s rating from ‘B2’ to ‘B1’ and revised the outlook from stable to positive.

The prospectus highlighted the revised ratings saying they address Jamaica’s creditworthiness and the likelihood of timely payment of its long-term bonds. However, it also cautioned as in a standard indemnity clause that the ratings could fluctuate in the future and impact the price at which the notes trade.

“Jamaica’s credit ratings may not improve and they may adversely affect the trading price of Jamaica’s debt securities including the notes, which could potentially affect Jamaica’s cost of funds in the international capital markets and the liquidity of and demand for Jamaica’s debt securities,” it said.

As another proviso, the prospectus indicated that the ongoing conflict between Russia and Ukraine could have a material adverse effect on Jamaica’s economy and its ability to raise funding in the external debt markets in the future.

No other conflicts were mentioned in the document but markets have been watching the heightened conflict in the Mideast between Israel and Palestine since early October.

[email protected]