Tue | Sep 26, 2017

Jamaica to raise US$1b on international markets

Published:Friday | August 18, 2017 | 8:00 AMSteven Jackson
Finance Minister Audley Shaw. The Debt Management Unit of Shaw's ministry is overseeeing the raising of US$1 billion of new debt on the international market.

Jamaica plans to raise US$1 billion ($128 billion) on the international market through two bond transactions that are expected to close today, Friday.

The placements are being led by Citigroup Global Markets Inc, Merrill Lynch, and Pierce, Fenner & Smith.

The Government of Jamaica (GOJ) is offering US$505 million of its 6.75 per cent notes due 2028 and US$364 million of its 7.875 per cent notes due 2045 for subscription.

The net proceeds to the Government of Jamaica from the sale of the 2028 and 2045 notes will be approximately US$1.001 billion before accrued interest and after the deduction of the underwriting discounts and expenses in connection with the sale, the prospectus says.

The bonds were priced Tuesday and settlement is scheduled for today, August 18.

Jamaica has applied for them to be listed on the Luxembourg Stock Exchange for trading on the Euro MTF Market of that exchange.

The notes will enlarge the pool of existing notes bearing those same maturity dates. Specifically, the US$505-million 2028 notes will be consolidated with existing 2028 notes with a principal of US1.35 billion. That will raise the total principal to US$1.85 billion for 2028 notes. The US$364-million 2045 notes will be consolidated with existing US$650 million of 2045 notes, bringing the principal to US$1 billion.

Jamaica's last foray in the international capital market was the repurchase of its 2017 and 2019 bonds in August 2016 which raised US$1.2 billion from investors to finance the purchase. Those notes paid interest at 10.625 per cent and 8.0 per cent, respectively.

Before that, in July 2015, the GOJ issued a dual-tranche bond in the amount of US$2 billion, described as the largest bond and lowest coupon. The funds were used to pay down PetroCaribe debt.

In a separate transaction earlier this week, Jamaica spent US$175.3 million to repurchase GOJ 2019, 2021, 2022 and 2025 notes. The lead arranger was Merrill Lynch.

"The announcement of buy-back of GOJ global bonds is a good one. I commend the GOJ for making this decision, although I feel that this should have been done several years ago," commented investor-analyst Sushil Jain via email to the Financial Gleaner.

In June, traders expressed hunger for a new GOJ external bond, saying Jamaica should take advantage of opportunities to get lower interest rates.

Up to June, GOJ global bonds were offering an annual average return of 5.5 per cent, stated the Bank of Jamaica in its Quarterly Monetary Policy Report released on Wednesday. The yield spreads on GOJ global bonds fell in the June quarter relative to selected benchmarks, the central bank said in the report.

The spreads between the indicative yields on GOJ global bonds and US Treasury bills as well as the JP Morgan Emerging Market Bond Index fell by 11 basis points to 3.89 per cent and four basis points to negative 0.11 per cent, respectively, relative to the March quarter, the central bank noted.

steven.jackson@gleanerjm.com