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Facing J$120b payout, FinMin 'hopes' for 100% NDX take-up - Large bondholders on board

Published:Wednesday | February 20, 2013 | 12:00 AM
A side view of the Ministry of Finance, in Kingston, seat of the treasury. - File

Marcella Scarlett, Business Reporter

With bondholders having the option of voluntary participation in the National Debt Exchange (NDX) programme that was launched last week by the Government of Jamaica, the Ministry of Finance said it is hoping for full participation.

"At this point, we are seeking to have a 100 per cent participation rate among the bondholders," said Pamella McLaren, head of the Debt Management Unit in the Ministry of Finance.

She said successful implementation of the new debt exchange programme is a critical precondition for an International Monetary Fund (IMF) agreement.

"Right now, we are in discussion with the various participants and we have got support from the bigger stakeholders, who are of the view that there should be strict penalties for those who do not wish to participate. You know, those we call holdouts, because this is a burden-sharing exercise," McLaren said.

Come Friday, the Government would have needed to pay out J$119.2 billion to bondholders - J$89.2 billion for principal on maturing bonds and J$30 billion in interest payment.

However, McLaren is looking for full participation in NDX, which would see the Government rolling the principal due into the new NDX bonds.

The 12.5 per cent fixed-rate JMD bond will be exchanged for a new fixed-rate bond paying interest of 7.25 per cent and maturing in 2016. The maturing 6.75 per cent US-denominated bond will be exchanged for a new bond paying interest of 5.25 per cent and maturing in 2020.

Also on Tuesday, GraceKennedy group announced its acceptance of the offer, while other large holders of government debt formally confirmed their participation in the debt swap in a united press conference.

Bruce Bowen, president and CEO of Scotia Group Jamaica, the second-largest holder of GOJ debt, was joined by four executives of other financial institutions for the announcement: Richard Byles of Sagicor Life Jamaica; Eric Hosin of Guardian Life Limited; Keith Duncan of Jamaica Money Market Brokers; and Maureen-Hayden Carter, president of First Global Bank.

"We acknowledge that a lot of people can see weaknesses with the IMF and this transaction," said Bowen, who is also the current president of the Jamaica Bankers' Association.

"Not all the stakeholders have committed; the other prior action is for the trade unions to be on board," said Bowen.

McLaren acknowledged that there might not be full participation because of the voluntary nature of the programme.

Asked what strategy the ministry has to pay the principal for those who do not participate in NDX, McLaren said the ministry was working on a solution.

"What I can say categorically is that all accrued interest will be paid out on Friday. The ministry is still to finalise how those (bond maturities) will be dealt with ... . We will communicate later in the week how exactly we will treat those," she said.

A number of bondholders have already accepted the offer, mostly institutions.

"Right now, we can't say how much take up we will have, but we are taking orders now and Thursday, when the offer closes, we will know," said the debt manager.

"We are not seeing much take-up by the retail customers, but what I would like to tell my retail customers is that if they hold less than J$25 million or US$200,000 of the old variable rate, fixed rate or US-dollar notes maturing in 2013 and 2014, they may opt for a new note that matures in 2014," she said.

Bowen is encouraging other creditors who have not yet accepted the offer to do so.

"Going forward, for this to succeed, we believe that all sectors of society, financial institutions, all the creditors, private sector, all of society need to come together and we need to play our part," he said.

"But we also need to hold ourselves accountable and the Government accountable for doing its part to make this work, because Jamaica as a country cannot go through this again."

Reporter Sabrina Gordon contributed to this story.