IDB Pledged $59Mn Bahamas Savings Through Guarantee

• The Bahamas is looking to save $59Mn per year via a $200Mn guarantee from the Inter-American Development Bank (IDB) to underwrite a proposed foreign currency bond issue. 
• The IDB’s $200Mn guarantee was linked to The Bahamas’ efforts to make the necessary reforms that would unleash the so-called Blue Economy as a key component of its post-COVID revival. According to the IDB, “the sovereign guarantee structure will provide important economic and financial benefits to the Government of the Bahamas.” 
• The expected savings for The Bahamas using the IDB sovereign guarantee (compared with a scenario of using a standalone non-guaranteed bond) is estimated at 96 basis points, which implies annual savings of $59Mn in net present value terms. 
• Such savings would equate to an interest coupon that would be almost one percentage point higher than without the IDB’s sovereign guarantee. The maximum guaranteed amount will be up to $200Mn to be financed from the ordinary capital resources of the IDB. 
• This financial structure could generate a superior combination of resource mobilisation, and cost reduction for the Bahamas’ Government.

(Source: The Tribune)