Creditors prod Grenada over lack of progress on debt

By Robin Wigglesworth in London


Grenada’s creditors, who hold three-quarters of the state’s bonds, have written an acerbic letter to the prime minister, complaining of a lack of engagement since the Caribbean nation defaulted on its debts last March.

Grenada has struggled to tackle its debt burden since being clobbered by tropical storms in 2004 and then by the global financial crisis. It defaulted on $257m of foreign and local debts in March 2013.

BroadSpan Capital, which is advising a committee of Grenadian bondholders, said in the letter that “consistent requests” for meetings had been rebuffed – most recently a last-minute cancellation of a meeting that was supposed to have been held on Wednesday.

Grenada’s debt restructuring is keenly watched for indications on how small Caribbean countries intend to treat their creditors. A swath of the Caribbean has fallen into an economic and financial crisis as indebted governments have struggled to cope with the tourism downturn that followed the financial crisis.

The committee is concerned about lack of progress in laying a solid foundation for a timely debt restructuring, an important component of the government’s plan to improve Grenada’s growth outlook and put its public finances on a sound footing.

The committee said it represented more than three-quarters of Grenada’s outstanding foreign and local creditors, including big investors such as Franklin Templeton, T Rowe Price and GMO and the hedge fund Greylock Capital.

Grenada has been delaying talks with its private creditors while it discusses another rescue programme with the International Monetary Fund.

But the letter – addressed to Keith Mitchell, the prime minister – said creditors “strongly objected” to Grenada’s approach, and urged the country to share more complete details on its overall debt stock and engage in “good faith” talks as soon as possible.

Early engagement with creditors is recognised as an essential best practice in debt restructurings, as it significantly speeds up the process of normalising relations with creditors, and reduces the risk that creditors may decide not to support a structure that was designed without their input.

The $193m bond maturing in 2025 is trading at just 32 cents on the dollar, according to Bloomberg data, indicating that investors expect a gouging haircut on their claims when the restructuring is eventually completed.

Apart from Grenada, St Kitts and Nevis, Antigua and Barbuda, Belize and Jamaica have had to restructure their debts twice in recent years. Many economists expect they will not be the last, with Barbados the possible next candidate for an IMF programme.

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