Mon | Mar 4, 2024

Suriname completes debt restructuring

Published:Friday | December 8, 2023 | 12:09 AM


Suriname on Wednesday completed its debt restructuring with international creditors with the issuance of a new bond.

“This operation alleviates debt service by US$972 million over 2020-2026 and allows the government to devote significantly higher spending on society during trying times,” the Ministry of Finance and Planning said in a statement.

“This transaction – that puts an end to complicated negotiations with bondholders – is the first successful sovereign debt restructuring achieved with bondholders since the pandemic,” it added.

“Today, despite the high interest rate environment, the new coupon has been reduced in absolute terms (7.95 per cent) and only pays a premium or 3.08 per cent on US bonds,” he added.

The first coupon payment will be made on January 15, 2024, at a 4.95 per cent interest. No principal payment is due before January 15, 2027.

According to the Ministry of Finance and Planning, Suriname obtained, on November 3, the instructions and consents required to exchange and/or modify 100 per cent of the aggregate principal amount outstanding of each series of its 2023 and 2026 bonds under the terms of its invitation.

The two Eurobonds, capitalised at high rates of 9.25 per cent for the bonds due 2026 and 12.875 per cent for the bonds due 2023 and amounting to US$912 million, were exchanged for a fixed-income instrument in the form of a new bond and a “value-recovery instrument” in the form of an oil-linked security.

The new bond is issued with a face value of USS660 million, a 10-year maturity, and a coupon of 7.95 per cent. During the first two years, only 4.95 per cent will be paid in cash, with the remaining three per cent capitalised. The new bond represents a 29 per cent principal haircut on original face value and accumulated past-due interest.

The Santokhi administration, when it came to power in 2020, inherited an unsustainable public debt burden, reaching 148 per cent of gross domestic product, from 41 per cent in 2015. The government embarked on an ambitious reform agenda, implemented an International Monetary Fund-supported programme, and committed to reducing public debt.

But as a result of difficult fiscal efforts and debt reduction, the public debt ratio is on track to be around 100 per cent at the end of this year and reach 2018 levels by 2028, the ministry said.

It added that the debt restructuring provides significant fiscal space to navigate through the structural reforms and sustainably support economic recovery.

Over the period 2020-2026, debt servicing, which amounted to US$1,073 million under the previous bonds, will be reduced to US$101 million. The new coupon on the restructured instrument is 7.95 per cent against 9.250 per cent (2026 bond) and 12.875 per cent (2023 bond).