Government of Bahamas Beats Bond Buyback Target At $216Mn

• The Government of Bahamas has beaten its debt buyback target by agreeing to repurchase almost $216Mn in Bahamian foreign currency bonds that were listed and traded on major international stock exchanges.
• The total to be acquired, using financing from a $300Mn loan provided by Standard Chartered Bank, slightly exceeds the original $210Mn goal and was disclosed in a statement issued on the Government’s behalf before global markets closed on Friday, November 15, 2024.
• The release revealed that the Government received $445.817Mn worth of offers from investors to sell their holdings of Bahamian sovereign bonds spread across six different issues with principal maturity dates ranging from 2028 to 2038.
• The $215.69Mn to be repurchased means that the Davis administration accepted just under half, or 48.3%, of investor offers. The combined value of the offers accepted by the Government following the transaction’s closing represents just 8.8% of the combined $2.43Bn in principal covered by the outstanding bond issues.
• The rationale for the debt buyback has yet to be fully disclosed. However, the Government is likely to be exchanging higher-cost bonds for a Standard Chartered loan carrying a lower interest rate, later maturity date and more favourable terms. Furthermore, the interest savings generated from this buyback should finance a conservation trust fund set up by the Government to help safeguard the marine environment. The transaction thus has some characteristics of a debt-for-nature swap.
• The Bahamas is also understood to be working on a similar transaction, possibly worth up to $500Mn, with the Inter-American Development Bank (IDB) - a deal that the latter’s president recently confirmed is being worked on in an interview with international media.
• Securing the $500Mn IDB loan would allow the Bahamas to refinance an additional 22.6% of outstanding debt at a more favourable rate. This would mean lower debt servicing costs, unlocking more funds for investments in domestic projects and reducing the sovereign’s fiscal deficit.

(Sources: The Tribune & NCBCM Research)