The Barbados government says there has been an “overwhelming support” from affected overseas creditors to its invitation in respect to the United States dollar claims that totalled US$667 million plus accrued interest.
A government statement said that preliminary results indicate that holders of approximately 94 per cent of total aggregate claims eligible under the exchange offers have agreed to participate by tendering their claims for exchange.
“Creditor participation rates for all instruments containing collective action clauses or the equivalent were in excess of the required 75 per cent voting thresholds. The government therefore expects that the relevant extraordinary resolutions will be passed at bondholder meetings to be held on 27 November 2019, and that 100 per cent of debt instruments covered by the invitations will be exchanged for the new bonds and cash consideration, in each case subject to the terms of the relevant invitation memoranda. “
The statement said that the final results will be announced after the bondholder meetings in accordance with the timetable set out in the invitation memoranda. The settlement of the invitations is scheduled to take place on December 11 this year.
“Upon closing, the transaction will provide Barbados with upfront debt cancellation of just over US$200 million. It will also spread out over the next decade heavy short-term U.S. dollar debt maturities that had been scheduled to fall due between June 2018 and October 2022.”.
The statement said that over this period alone, the US dollar commercial debt exchange will generate cash flow savings of approximately US$500 million.
“The external debt exchange complements the Barbados dollar exchange offer that closed successfully in October 2018 covering the equivalent of US$6 billion, and effectively completes the restructuring of Barbados’s until-now unsustainable public debt burden that was announced on 1 June 2018.”
The statement said that the Mia Mottley government expects that the successful restructuring of its Barbados and U.S. dollar-denominated debts will, in conjunction with the fiscal and economic reforms already being implemented under the Barbados Economic Recovery and Transformation (BERT) plan, allow the country’s debt-to-GDP ratio to fall to 60 per cent by 2033/34.
“It is also expected that the closing of the US dollar debt exchange offer will generate further momentum for the rehabilitation of Barbados’s credit rating, and for the ambitious reforms being rolled out under the BERT plan with the support of an Extended Fund Facility from the International Monetary Fund (IMF).”
BERT is aimed at restoring restore macroeconomic and debt stability, increase international reserves, and raise growth and earlier this month received a nod of approval from a visiting IMF delegation.
The government statement said that the inclusion of innovative ‘natural disaster clauses’ in the new bonds issued, or soon to be issued, in connection with both the Barbados dollar and US debt exchanges means that Barbados is set to become the first country in the world to make its public debt climate resilient.
“Natural disaster clauses allow the sovereign debtor to defer certain payments on its public debt for a predetermined period of time in the event of a natural disaster, subject to certain conditions.”
Prime Minister Mottley, speaking soon after the preliminary results of the bond became public, said “I would like to express my gratitude to all of our creditors for coming along with us on this historic journey to rebuild and rehabilitate Barbados following 10 years of economic mismanagement by the last government.
“The extensive debt relief that you have agreed to provide will support our ongoing efforts to fundamentally change the way we do things for the better, and to transform the outlook for Barbadians.
“As we bring this chapter to a close, we look forward to a new era of close cooperation and to eventually restoring our credit rating to the investment grade level achieved before the Barbados Labour Party last left office,” she added.