IFC to float US$500m of bonds in Jamaica - Instruments to be priced in JMD
Published:Sunday | September 22, 2013 | 12:00 AM
Lavern Clarke, Business Editor
NASSAU, Bahamas:
The International Finance Corporation (IFC) plans to raise the Jamaican dollar equivalent of US$500 million of debt capital through a series of bond floats on the Jamaican market.
The target fundraising at current exchange rates would amount to J$51 billion. The amount to be raised by each bond issue will be determined by the cost of the project for which the IFC is fundraising.
Zhang Jun, IFC senior Caribbean regional manager, said last Friday that the Finance Ministry and the Bank of Jamaica have already approved the bond.
Zhang has signalled that the 360 megawatt power-plant project could be among the first to be financed through this mechanism, saying the IFC was approached by unspecified bidders on the project.
It may also be used to back the airport divestment, port expansion and other projects.
However, the IFC official was vague on when the first float would occur, saying only that it would be within the four-year period of the International Monetary Fund agreement with Jamaica.
The bonds, which will have triple-A ratings, will be targeted at pension funds and banks, whose risk weightings are regulated, as well as other investors.
The IFC is yet to identify arrangers and brokers for the offer, but said it will be contracted to a mix of international and local partners.
The IFC instrument offers a new way to mobilise local currency capital, said Zhang. By pricing the offer in the local currency, he said, "the bond also aims to eliminate currency mismatch".
The terms of the offers are yet to be determined and to some extent will be defined by the individual project proposals from investors who apply for IFC financing.
Zhang said, given the IFC's triple-A rating, the coupon rates will be set below local treasury bill yields, which are performing within a range of 6.32 per cent to 7.96 per cent.
Jamaica will be the second Caribbean market in which IFC will float the debt instrument as a fundraising tool for private initiatives.
Zhang, who is stationed in the Dominican Republic, said the IFC used the mechanism earlier this year to raise the equivalent of about US$10 million for lending to two microfinance operations in that country.