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Grenada launches US$262m debt exchange

Published:Friday | October 9, 2015 | 10:00 AMCMC
Dr Keith Mitchell., Prime Minister of Grenada.

The Grenadian government has launched a debt swap of its 2025 bonds that comes with a 50 per cent haircut for bondholders, and extends the maturity profile of the debt by up to five years.

The debt exchange includes bonds priced in EC and US dollars.

"The offer to exchange the 2025 bonds for new bonds follows intensive and detailed negotiations with the Steering Committee of Grenada Bondholders, and will implement the 'in principle' agreement reached earlier this year to reduce the original principal amount of the 2025 Bonds by 50 per cent in two stages," the government said in a statement.

The first half of the principal reduction will be implemented on the closing of the proposed transaction. The second round of cuts will be executed when Grenada's current Extended Credit Facility with the International Monetary Fund (IMF) comes to an end.

An ambitious programme

In 2014, Grenada entered into a three-year US$21.9-million agreement with the IMF to support an "ambitious programme" to correct the island's fiscal imbalances and create growth for its growth.

The debt restructuring is expected to wipe 19 per cent off Grenada's debt-to-GDP ratio, a much-needed reprieve considering that the country's total public-sector debt reached 111 per cent of GDP in 2014, according to IMF estimates.

Earlier this year, Grenada said it had reached a restructuring deal with creditors that included the two-phase haircut and special warrants related to the island's citizenship-by-investment programme.

The deal, which covers some US$262 million of international and local bonds on which the island defaulted in early 2013, ended lengthy negotiations with creditors, who agreed to take a 50 per cent write-down on the face value of their holdings.

The new bonds will have a fixed annual coupon of seven per cent, and a final maturity in May 2030, with equal semi-annual principal amortisations commencing in May 2016.

St George's said the restructuring deal will give new bondholders a share of a capped portion of revenues generated by Grenada's citizenship-by-investment programme, after the IMF agreement ends.

Grenada has also included a 'natural disaster clause' that, subject to certain conditions, will enable the island to capitalise interest payments and defer principal maturity dates on the bonds in the event that the island is adversely affected by tropical cyclones, earthquakes, or other disasters.

The government said it expects to issue the new bonds on or around October 29.