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BARBADOS | Gov't Announces Creditor Support for its US Dollar-Commercial Debt Exchange

Featured Prime Minister and Minister of Finance, the Hon. Mia Amor Mottley Prime Minister and Minister of Finance, the Hon. Mia Amor Mottley
BRIDGETOWN, Barbados, November 23, 2019 - The Government of Barbados today announced that the invitations and consent solicitations announced early November in respect of seven series of U.S. dollar claims on the Government of Barbados and its public sector, for a total of US$677 million plus accrued interest, have received the overwhelming support of affected creditors.

Preliminary results indicate that holders of approximately 94% of total aggregate claims eligible under the exchange offers have agreed to participate by tendering their claims for exchange.

Creditor participation rates for all instruments containing collective action clauses or the equivalent were in excess of the required 75% voting thresholds.

The Government therefore expects that the relevant extraordinary resolutions will be passed at bondholder meetings to be held on 27 November 2019, and that 100% of debt instruments covered by the invitations will be exchanged for the new bonds and cash consideration, in each case subject to the terms of the relevant invitation memoranda.

The final results will be announced after the bondholder meetings in accordance with the timetable set out in the invitation memoranda.

The settlement of the invitations is scheduled to take place on 11 December 2019. 

Upon closing, the transaction will provide Barbados with upfront debt cancellation of just over US$200 million. It will also spread out over the next decade heavy short-term U.S. dollar debt

maturities that had been scheduled to fall due between June 2018 and October 2022. Over this period alone, the U.S. dollar commercial debt exchange will generate cash flow savings of approximately US$500 million.

The external debt exchange complements the Barbados dollar exchange offer that closed successfully in October 2018 covering the equivalent of US$6 billion, and effectively completes the restructuring of Barbados’s until-now unsustainable public debt burden that was announced
on 1 June 2018.

The Government expects that the successful restructuring of its Barbados and U.S. dollar-denominated debts will, in conjunction with the fiscal and economic reforms already being implemented under the Barbados Economic Recovery and Transformation plan, allow the country’s debt-to-GDP ratio to fall to 60% by 2033/34.

It is also expected that the closing of the U.S. dollar debt exchange offer will generate further momentum for the rehabilitation of
Barbados’s credit rating, and for the ambitious reforms being rolled out under the BERT plan with the support of an Extended Fund Facility from the International Monetary Fund.

The inclusion of innovative ‘natural disaster clauses’ in the new bonds issued, or soon to be issued, in connection with both the Barbados dollar and U.S. dollar debt exchanges means that Barbados is set to become the first country in the world to make its public debt climate resilient.

Natural disaster clauses allow the sovereign debtor to defer certain payments on its public debt for a predetermined period of time in the event of a natural disaster, subject to certain conditions.

Upon the announcement of the preliminary results, the Prime Minister and Minister of Finance Mia Amor Mottley, said: “I would like to express my gratitude to all of our creditors for coming along with us on this historic journey to rebuild and rehabilitate Barbados following
10 years of economic mismanagement by the last government.

The extensive debt relief that you have agreed to provide will support our ongoing efforts to fundamentally change the way we do
things for the better, and to transform the outlook for Barbadians. As we bring this chapter to a close, we look forward to a new era of close cooperation and to eventually restoring our creditrating to the investment grade level achieved before the Barbados Labour Party last left office.”

White Oak Advisory Limited is acting as financial advisor to the Government of Barbados in the restructuring of its public debt. Cleary Gottlieb Steen & Hamilton LLP is acting as legal advisor to the Government of Barbados.

Last modified onSaturday, 23 November 2019 20:06
  • Countries: Barbados

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