Grenada Launches New Debt Exchange Offer

ST. GEORGE’S, Grenada CMC – The Grenada government has launched a debt exchange offer exchanging its United States (US) and Eastern Caribbean (EC) dollar bonds due in 2025.

The Keith Mitchell administration said that the bonds are being exchanged for new US and EC dollar bonds to be issued by Grenada.

“The offer to exchange the 2025 Bonds for New Bonds follows intensive and detailed negotiations with the Steering Committee of Grenada Bondholders, and will implement the ‘in principle’ agreement reached earlier this year to reduce the original principal amount of the 2025 Bonds by 50 per cent in two stages,” the government said in a statement.

It said the first half of the principal reduction will be implemented upon the closing of the proposed transaction, with the remaining half upon timely completion by Grenada of its current Extended Credit Facility (ECF) with the International Monetary Fund (IMF).

In 2014, Grenada entered into a three-year US$21.9 million ECF to support an “ambitious programme” to correct the island’s fiscal imbalances and lift sustainable growth.

Grenada will receive debt relief worth 19% of its GDP through the restructuring, a much-needed reprieve considering that the country’s total public sector debt reached 111 per cent of gross domestic product (GDP) in 2014, according to IMF estimates

Earlier this year, Grenada said it had reached a restructuring deal with bond creditors that includes a two-phase haircut and special warrants related to the island’s citizenship-by-investment programme.

The deal, which covers some US$262 million of international and local bonds on which the island defaulted in early 2013, ended lengthy negotiations with creditors, who agreed to  take a 50 per cent loss on the face value of their holdings.

The government said that the new bonds will have a final maturity falling due in May 2030; equal semi-annual principal amortizations commencing in May 2016 and a fixed annual coupon of seven per cent.

The government said new bond holders will also participate in a sharing mechanism that will entitle holders to receive a capped portion of revenues that may be generated by Grenada’s citizenship-by-investment programme above certain thresholds following the successful completion of the ECF.

Grenada has also included a “natural disaster clause” that, subject to certain conditions, will enable the island to capitalise interest and defer principal maturities due on the bonds in the event that Grenada is adversely affected by tropical cyclones, earthquakes, or other natural disasters.

The government said it expects to issue the new bonds on or around October 29.