The debt exchange deal

A Grenadian Senator is asking the cash-strapped Keith Mitchell-led government in St. George’s for answers on the deal reached with international bondholders of a large chuck of the island’s massive debt.

Labor Representative in the Senate, Ray Roberts wants government to come clean with Grenadians and tell them whether the agreed “hair cut” with the creditors will affect only the principal or both principal and interest on the millions of dollars owed.

Speculation is rife that the deal could see Grenada having to pay off millions to the creditors in both interest payments and on the principal all at the same time.

Sen. Roberts issued a press statement within hours of the release put out by the Ministry of Finance on the debt restructuring reached with the bondholders who are mainly from the United States.

The release said the following:  “Today’s Ministry of Finance Press release announcing that the government and creditors have finally come to an amicable agreement, is nothing to celebrate because it reflects the tragedy of a government that has failed to manage the scarce financial resources of our country properly.

Among the consequences of today’s agreement is the workers pension fund at the NIS. To get this agreement with the creditors, millions and millions of dollars in government investment bonds with the NIS are being rolled over to a period of twenty/thirty years, and the dire consequence is that it will impact on the financial strength of the NIS and the future pension workers will receive.

What is extremely sad about this entire episode is that the state has done everything possible to keep this aspect of the negotiation closeted. As I walk the streets and workers question me about the impact of the NIS new arrangements with the government, unfortunately I cannot provide them with comprehensive and intelligent answers.

I am again calling on the government and specifically the Minister of Finance to not just boast about the agreement with the creditors and praise the agreement as a public good for the people, but also to let the workers retiring five, ten, twenty and thirty years from today know what is the likely impact the new arrangements will have on their future.

Further, since the Mitchell Administration is in the business of boasting, why don’t they tell the Grenadian people exactly how they intend to service the national debt going forward even with the anticipated haircut?  Also, doesn’t the Minister of Finance feel obligated to come clean with the public on the actual implications of the haircut from the external creditors?

Mr. Finance Minister, is the haircut going to be applied to both principal and interest or only to the principal?  Are the external creditors willing and able to accept huge losses on their investments in order to save Grenada financially? Or is it the case that most, if not all, of the principal written off will be recovered through higher interest rates on the remaining debt?

And finally, can the Minister of Finance tell the Grenadian people exactly what sort of impact in real dollar terms the proposed haircut would have on government’s finances given that the government is already struggling to generate a significant primary surplus much less a current surplus?

As a public service, THE NEW TODAY reproduces in full the release issued by government on its deal with the bondholders:

The government of Grenada announced on Thursday that the debt exchange offer launched on October 5, 2015, has received the overwhelming support of Grenada’s creditors.

Holders of 94 percent of the country’s US Dollar Bonds due 2025 and 100 percent of EC Dollar Bonds due 2025 outstanding and eligible to vote in the exchange (collectively, the “2025 Bonds”) have agreed to provide extensive debt relief to Grenada by tendering their bonds in exchange for new Grenada US Dollar and EC Dollar Bonds due 2030 (the “2030 Bonds”).

Under the terms of the US Dollar Bonds due 2025 and Grenada’s exchange offer, holders of not less than 75 percent of the US Dollar Bonds due 2025 have provided instructions to the Trustee for the entirety of the US Dollar Bonds due 2025 to be tendered in exchange for 2030 Bonds in accordance with the terms of Grenada’s offer.

The results of the tender process that ended earlier this week means that all bonds outstanding on the closing date will be exchanged for 2030 Bonds later this month.

The Prime Minister and Minister of Finance of Grenada, Dr Keith Mitchell, said, “Today is a very important day for the people of Grenada, who are currently making sacrifices of their own in order to improve the prospects of our beloved country.

“We are delighted with the results of this process, which paves the way for the cancellation of 50% of the face value of our international bonds. We extend our appreciation to our creditors for their cooperation and support.”

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