Jamaica refinancing US$3b of foreign debt
Published:Friday | September 6, 2019 | 12:00 AM
The Government of Jamaica plans to refinance US$3 billion worth of sovereign bonds aimed at reducing the country’s debt payments over time.
The old notes are slated to be replaced with new notes at lower coupons and longer maturities.
The invitation opened on Wednesday, September 4, and will close next Tuesday, September 10, unless extended or terminated.
“Jamaica will use a portion of the proceeds from the issuance of the new notes for cash to pay for old notes purchased in the invitation,” the ministry said in a statement. “The invitation is part of a broader programme of Jamaica to proactively manage its external public debt.”
There are four sets of notes that the Government wants to buy back, including an 11.6% note due 2022, 9.25% note due 2025, a 7.6% note due 2025, and a 6.7% note due 2028. Bank of America and Citigroup are the managers for the deal.
“It is positive for Jamaica, because it extends the maturities and reduces the annual cost of funds,” said Devon Barrett, group chief investment officer at Victoria Mutual Group, in reference to the interest payments made by the Government to service the debt .
Barrett said the process would ultimately result, assuming a take-up of the offer by investors, in longer maturities for the bonds and lower coupon rates.
“Persons might think it is a curious thing,” said Barrett, referencing in particular the inclusion of the bond that carries an 11.6 per cent coupon and has tax-free status. As for the other notes, their replacement would likely be at or under 5.0 per cent with maturities stretching to around 2045, he said.
Finance Minister Nigel Clarke did not respond to a request for comment on the offer.
The size of Jamaica’s public debt is at its lowest level in 18 years and now equates to just below 100 per cent of GDP. At one stage, the debt had climbed near 150 per cent of GDP, but shrank under the economic reform programmes worked out with the International Monetary Fund, which included two large debt restructuring programmes with domestic investors.
Jamaica foreign debt was estimated at $1.2 trillion in June, amid a total debt stock of $1.97 trillion.