Sat | Feb 17, 2018

Jamaica buys back two global bonds amid new debt issue

Published:Sunday | August 14, 2016 | 12:00 AMSteven Jackson
Minister of Finance Audley Shaw
The Ministry of Finance and Public Service building at Heroes Circle in Kingston.

The Government of Jamaica announced that its offer to buy back 2017 and 2019 old bond notes was accepted, which paves the way for it to offer up to US$1.2 billion to investors to finance the purchase of the old notes.

Jamaica intends to apply to have the new notes listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market of that exchange, the prospectus indicated.

"All old notes validly tendered in the tender offer have been accepted for purchase. Jamaica also announced that the aggregate total price for all old notes accepted for purchase is US$870.9 million," stated a release on the bond issue.

Citigroup Global Markets Inc and Merrill Lynch, Pierce, Fenner & Smith Inc acted as dealer managers for the tender offer which expired as scheduled at 2 p.m. New York City time on Thursday.

On that day, an updated prospectus indicated that the Jamaican Government would seek to raise US$743.2 million at 8.0 per cent from amortising notes due 2039 as one of two offers to finance the purchase of the old notes.

"Upon completion of this offering, the aggregate principal amount of notes outstanding will be US$1.24 billion," stated the prospectus. The settlement date is listed as August 18 and interest payments are set to commence September 15, 2016.

Jamaica intends to use some proceeds of the sale of the new notes to pay for the 2017 and 2019 notes. Those notes paid interest at 10.625 per cent and 8.0 per cent, respectively.

"Jamaica has agreed to apply a portion of the net proceeds of its new notes offering priced on Thursday ... to purchase the old notes accepted pursuant to the tender offer from the billing and delivering bank at the applicable purchase price plus accrued interest," stated a release on the matter.

The prospectus indicates that Jamaica has experienced volatility in its macroeconomic drivers in addition to economic crises in recent decades. It added that continued uncertainty might affect its ability to service its notes.

"Jamaica cannot offer any assurance that the Jamaican economy will grow in the future. Economic growth depends on a variety of factors, including, among others, the sustainability of tourism, the stability and competitiveness of the Jamaica dollar against foreign currencies, confidence among Jamaican consumers and foreign and domestic investors and their rates of investment in Jamaica, the willingness and ability of businesses to engage in new capital spending and the rate of inflation," the document stated.

"Some of these factors are outside of Jamaica's control. If Jamaica experiences economic problems, Jamaica may have difficulty in servicing the notes."

The Jamaican economy expanded by 0.8 per cent in 2015 and 0.4 per cent in 2014, the prospectus stated.

The Finance Ministry referred requests for comment to Citigroup, but no response was forthcoming from them up to press time.