US$480 Million, 12-Year Bond a Signal of Confidence in Jamaica

  • Economist in the Ministry of Finance and the Public Service, Keenan Falconer, says the Government’s first structured securitisation transaction in the international capital markets is a sign of confidence by international investors in the quality of Jamaica’s financial instruments.
  • The Government of Jamaica successfully raised US$480Mn by securitising assets associated with the Norman Manley International Airport (NMIA). Mr. Falconer clarified that securitisation involves transforming an asset into a financial security—an instrument with inherent value that typically generates interest—allowing it to be sold for revenue generation.
  • “In this case, the Government has grouped together expected revenue sources over the next 12 years that are due to the NMIA and converted it into a bond, which is the security. They then sold this security to an investor or group of investors in the international capital markets,” he noted. Under the transaction, investors will have the right to collect revenue from those who owe money to the NMIA for the next 12 years, while the Government receives cash upfront from the sale.
  • After accounting for transaction fees, the net proceeds will be used to reduce some interest costs on the national debt and to provide budgetary support for ongoing expenses, including funding government programs and paying wages and salaries. “Some of the funds will also be used to finance capital expenditure through greater spending on new infrastructure projects like the SPARK programme,” Mr. Falconer noted.
  • This transaction means that the Government will now be able to receive cash to pursue its development objectives and implement initiatives announced in the Budget for the rest of the fiscal year. Furthermore, Mr. Falconer told JIS News that despite the issuance of a bond, which is a debt instrument, “this transaction means that Jamaica does not take on any additional debt”
  • A special purpose vehicle (SPV), Kingston Airport Revenue Finance (KingAir) was created to oversee and manage the bond. The entity’s primary role is to collect the proceeds from the international investors paying for the bond, and to remit those funds to the Government of Jamaica, Mr. Falconer explained. As a result, the Government has granted KingAir rights to 52.33% of the revenue generated by the NMIA allowing the company to carry out its functions in exchange for the funds raised.

(Source: JIS)