By Christopher Spink
Grenada has been so successful in persuading people to pay US$200,000 to become citizens of the Caribbean island that a unique clause in warrants linked to bonds restructured in 2015 is expected to trigger, giving holders a share in revenues from the citizenship fees.
Under the restructuring, holders of US$262m of local and international bonds agreed to take a 50% loss on the face value of their notes but one of the conditions was they would be allowed to take part of the monies raised from selling Grenada citizenship.
The island agreed, under a programme monitored by the International Monetary Fund, to give 25% of any such revenues made annually between US$15m and US$50m and 35% of anything above that level in any particular year, subject to a cap.
The payment would only be made once the six-part IMF programme completed.
Grenada passed its sixth review last May and the latest citizenship revenue figures, which are calculated by a private bank and vetted by the IMF, were published this month. They show that EC$139.9m (US$51.8m) was raised by the programme in 2017.
That suggests bondholders who have retained warrants stand to receive a payment of as much as US$9.4m, mitigating their losses to a certain degree. The warrants are detachable and can be traded separately.
Of the 842 new citizens under the programme (the US$200,000 payment can cover families), two-thirds made simple payments to Grenada’s National Transformation Fund, ring-fenced from other government funds.
The remainder invested at least US$365,000 in development projects on the island.
The most common applicants for citizenship are understood to have come from Iran and China.
A source close to the government told IFR that the payment was likely to be made alongside the coupon due on the 2030 7% bonds in the second half of the year, once all the figures have been checked, rather than the one in April.
(Reproduced from the International Financing Review, considered as the world’s leading provider of global capital markets intelligence).