The Bahamas Secures $500Mn 10-Year Commercial Loan Via IDB Guarantee

• Having secured more than 50% of its external borrowing for the 2023/2024 fiscal year, Bahamas’ Ministry of Finance said the $500Mn Inter-American Development Bank (IDB) guarantee-backed loan it successfully closed last week will support some of the necessary infrastructure, education, and social welfare projects in the second half of the fiscal year, as well as provide a “solid anchor” for the government’s medium-term external funding plan.
• The $500Mn, 10-year commercial facility, arranged by US bank Banco Santander’s New York branch, is the first time the IDB will be covering initially up to 40% of scheduled principal and related interest under a first-loss, policy-based guarantee - a mechanism whereby a third party compensates lenders if the borrower default.
• According to the ministry, in a statement released, this allows for more favourable financing terms and lower interest rates than what is being offered right now on international bond markets.
• “As a result, The Bahamas secured significant savings compared to the market cost of funding at the time of transaction closing. This structure will advance the country’s objective of reducing debt service costs, extending maturities, and tapping new liquidity pools as outlined by the Medium-Term Debt Strategy and Annual Borrowing Plan for Fiscal Year 2023/24.”

(Sources: Nassau Guardian & Eyewitness News)