& Corporate Capital Markets Sovereign Strategic Economy & Fixed Income Fund Policy for the Suriname Coronavirus
Suriname on Saturday launched an initiative to require creditors to forgo interest payments on sovereign bonds due 2023 and 2026 after a 30-day grace period ending on or before November 25.. .
Interest payments on $ 675 million in US dollar debt were originally due in October. 26. The government said in a statement that the approval request seeks « a short-term exemption from some of the republic’s financial obligations in order to participate proactively in an organized and transparent manner in a dialogue aimed at establishing a sustainable debt framework for the republic. ».
The approval request expires at 5:00 PM EST on Tuesday, November 24. The proposal would give the government five months to arrange its fiscal house.
Creditors have daily discussions with the government, a creditor source familiar with the situation told LatinFinance, on the condition of anonymity, given the ongoing talks.
“I think this has a risk of not succeeding because there is simply not much time left. There is barely enough time for seasoned investors to agree to the approval request, let alone other bondholders, the source said, adding that this risks a severe default, which may not really change the negotiating environment.. .
“There is very little or nothing provided here by the government regarding approval application fees,” the source said, referring to the “approval payment” that each bondholder will receive to approve the petition..
Suriname offers $ 0. 50 per $ 1,000 from principal pending. In other words, bondholders would receive a fee of $ 500 for every $ 1 million they own. “It’s really such an icon, so it makes you wonder how seriously these guys are getting it done.
The government said forgiveness of debt payments will help the country preserve its foreign currency holdings to help it manage the « economic, social and humanitarian fallout of the ongoing COVID-19 crisis ». .
Earlier this month, creditors holding more than 25% of the principal outstanding formed a formal Debt Holders Committee to represent their interests with Newstate Partners LLP appointed to act as their financial advisor while negotiating terms for a potential restructuring..
LatinFinance reported earlier that panelists include Franklin Templeton, Eaton Vance, GMO, and Greylock Capital.
“A jury is disqualified as to whether creditors will be inclined to accept (offer to seek consent) or not.. The biggest allowance is timing. One of the second creditors familiar with the discussions, who spoke on condition of anonymity given the talks going on, said Suriname left them so late that I think accepting it would be a challenge for most creditors, even if they wanted to..
In October, Suriname was due to make an interest payment of about $ 25 million for the 9. 25% 2026 bonds. In midday trade, the 2026 issue was unchanged at bid price of 52. 75, down from three weeks ago, and a flat return at 24. 87%. Suriname sold $ 550 million in 2026 banknotes in 2016 and $ 125 million in 2023 banknotes just under a year ago..
In July, Suriname said it had secured approval from nearly all of its bondholders to delay payment of the principal. 875% 2023 banknotes.
The 2023 papers were originally issued in December 2019 to pay for the Avobaka Hydroelectric Dam owned by the American aluminum-producing company Alcoa. The same total principal amount of $ 125 million remained owed on this amortized debt with an average age of 2. 25 years time of approval.
Suriname said it is in talks with the International Monetary Fund to obtain a funded lending program in hopes of stabilizing the macro-financial framework. .
“The Suriname authorities have called on the staff of the International Monetary Fund to participate directly with the committee during the proposed period to defer capital and postpone interest, and the aim is to provide bondholders with a forum to exchange their ideas and views on the design of the financed IMF – a supported program for Suriname,” Suriname said in Announcing the approval request.
“The Republic believes that this program supported by the International Monetary Fund will help it deal with economic and health crises and meet its urgent short-term financing needs.”. .
Suriname has been led since mid-July by President Chan Santokhi of the center-left Progressive Reform Party, or VHP.. They deferred interest payments in October and asked creditors to consider a freeze agreement on October 30.
Finance Minister Arman Achaibersingh told bondholders late last month that the Santokhi administration had inherited a « faltering economic and financial situation » exacerbated by the coronavirus pandemic and the collapse in oil prices, leaving the country without sufficient foreign reserves to cover short-term debt payments.
With 12. Akalbircing said that a 5% drop in GDP in 2020, a debt-to-GDP ratio of 137%, debt servicing at 46% of government revenue and an acceleration of external debt accumulation, the country’s liquidity and refinancing risks are increasing. .
Lazard Frères acts as a financial advisor to Suriname while legal advice is provided by White & Case LLP.
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Debt, Suriname, Payment, Bonds
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