Barbados launches offer to exchange dollar debt for new instruments

By Marisa Wong

Morgantown, W.Va., Sept. 11 – The government of Barbados announced it launched an offer to exchange the vast majority of its existing dollar-denominated debt for new debt instruments.

The offer expires at 5 p.m. ET on Sept. 28.

The government said the exchange offer follows its June 1 announcement that it would seek a comprehensive restructuring of the country’s unsustainable debt burden.

The affected dollar-denominated debt instruments include Treasury bills, Treasury notes, debentures, loans and bonds owed by the government, loans and bonds owed by state owned enterprises and other entities that receive transfers from the state budget and arrears owed by the government and its public sector.

Savings bonds do not fall within the scope of the exchange offer and will not be restructured, the government noted.

Individuals holding affected debt will be offered a portfolio of new instruments maturing between 2022 and 2033 that have the shortest maturities being offered in the debt restructuring.

Specifically, pensioners may exchange existing Treasury bills, notes and debentures for 11 series A exchange instruments with maturities of five to 15 years, the combined face value of which will equal that of the debt exchanged plus accrued interest. All other individuals may exchange their existing debt for 11 series B exchange instruments with maturities of five to 15 years, the combined face value of which will equal that of the debt exchanged plus accrued interest.

The aggregate principal amount of the exchange instruments (for each series) will be allocated as follows: 7.49% for the five-year exchange instruments, 7.78% for the six-years, 8.07% for the seven-years, 8.38% for the eight-years, 8.7% for the nine-years, 9.03% for the 10-years, 9.37% for the 11-years, 9.72% for the 12-years, 10.1% for the 13-years, 10.48% for the 14-years and 10.88% for the 15-years.

Accrued interest will be capitalized through Sept. 30 and added to the principal. The interest rate will be 1% for the first three years, 2½% for year four and 3¾% to maturity.

The principal of each exchange instrument will be repaid in four equal quarterly installments beginning one year prior to the applicable maturity date.

For institutions participating in the exchange offer, the exchange instruments will include in addition to the 11 series B amortizing exchange instruments described above, 11 series C amortizing instruments with similar terms as the series B instruments, as well as 20 series D amortizing instruments and liquidity reserve fund Treasury bills.

The 20 series D instruments will have maturities of 16 to 35 years, with 5% of the aggregate principal allocated per maturity. Interest will be 1½% for the first five years, 4¼% for years six through 10, 6% for years 11 through 15 and 7½% until maturity. The principal will be repaid in four equal quarterly installments beginning one year prior to the applicable maturity date.

The liquidity reserve fund Treasury bills will be 90-day Treasury bills. Interest will equal ½% for the first 10 years and market rates after that.

Institutions that are eligible to participate include banks; life insurers; general insurers; institutions like charities, churches, cooperatives, credit unions and trust companies; and other institutions.

The government announced that payment of interest on the affected debt was suspended as of Sept. 7.

The automatic rollover of principal maturities due on the affected debt was announced on June 1. The new dollar-denominated debt instruments that holders of the affected debt will receive if they participate in the exchange offer are expected to be issued toward the end of October. Normal debt servicing of the new instruments will begin at issuance, the government said.

Questions may be directed to the director of finance and economic affairs at 246 535-5668.

The government said the launch of the exchange offer follows three months of extensive consultations between the government and representatives of the creditors and creditor groups that would be affected by the debt restructuring, including the country’s banks, its insurance companies, the National Insurance Scheme and the Central Bank of Barbados.

The government also announced that it expects that holders of outstanding dollar-denominated commercial debt issued or guaranteed by the government of Barbados will be invited to participate in the comprehensive debt restructuring program in a separate and subsequent transaction.

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