Barbados’s rapid implementation of an IMF backed fiscal adjustment programme will support capital inflows over the near-term, relieving pressure on its external accounts. However, Fitch believes the unresolved renegotiation of its external debt will continue to undermine business operations and investment over the coming quarters. An extended or acrimonious renegotiation poses downside risks to medium-term economic forecasts.

(Source: Fitch)

• Fitch expects the Belizean government led by Prime Minister Dean Barrow will face declining public support over the coming quarters due to elevated crime and weak economic activity. 

• Weak public support will undermine the administration’s efforts to reduce its substantial debt load over the coming years. 

• Belize earns a score of 64.0 out of 100 on our Short-Term Political Risk Index, ranking 20th out of 26 Caribbean economies and reflecting our assessment of weak social stability and a challenging policymaking environment.

 (Source: Fitch)

• On Wednesday Digicel said investors holding 94.7% of its 2020 bonds had agreed to a plan to exchange the bonds for debt maturing in 2022. A further offer to postpone the repayment of  the $1Bn bond due in 2022 by two years remains on the table, with a deadline falling on Friday for investors to accept the terms. 

• Mr O’Brien’s push to restructure these bonds prompted credit rating agencies Moody’s and Fitch to downgrade Digicel, which has debts of $6.7bn. A committee of bondholders had dismissed his original plan as “unacceptable”. But he sweetened the terms this month, improving the standing of $580m of the 2020 bonds by exchanging them for new senior secured bonds. 

• The interest rate will remain the same at 8.25 per cent. The plan to postpone the 2022 debt would increase the interest rate to 9.125 per cent from 7.125 per cent.

 (Source: The Financial Times)

• Access Financial Services Limited (AFS) has announced that it has completed the acquisition of 100% of the outstanding shares of Embassy Loans Inc., a Florida based auto equity finance company, at a cost of US$6.4M. 

• The transaction which was completed on December 14, 2018 was funded from the proceeds of a J$900M global bond which was issued in October 2018. 

• The acquisition of Embassy is in keeping with AFS’s long-term strategy to diversify the Company’s operations and revenue streams into markets where profitable opportunities for growth are identified and it provides a platform for expansion in North America.

(Source: JSE)

• Fitch forecasts that the Jamaican dollar will depreciate over the coming months, as inflation picks up and the current account deficit widens. Over the long term, they expect the pace of depreciation to slow relative to the past decade as more orthodox economic and monetary policies support the currency. 

• Additionally, Fitch expects real interest rates in Jamaica will remain well below those in the US over the coming quarters, placing downside pressure on the Jamaican Dollar. 

• While they expect the Bank of Jamaica to increase its benchmark policy rate by 75 basis points (bps) in 2019, they anticipate that it will maintain a relatively accommodative policy stance. Meanwhile the expectation is that the US Federal Reserve will raise interest rates in the US by an additional 75bps points in 2019 after raising rates by 75bps in 2018.

(Source: Fitch)

(Bloomberg) Billionaire Denis O’Brien’s telecoms company, Digicel Group Ltd., is edging toward an accord with some investors to push out a share of its debt after months of negotiations, according to a person familiar with the talks.

The company is offering new secured bonds maturing in 2022 in exchange for $2 billion of unsecured notes originally due in September 2020 and may announce at least a portion of its investors have taken up of the offer as soon as Tuesday, said the person who asked not to be named as the information is not yet public.

Digicel Sweetens Bond Exchange Offer Following Creditor Pushback

Bondholders balked at elements of an exchange plan outlined by Digicel in August and quickly organized to push for better terms. This month, Digicel extended the deadline for take up of the offer to December 18 and sweetened the terms. The company has been reviewing options to tackle debt used to turn the mobile-phone carrier into a global operation, with customers spread from El Salvador to Vanuatu.

If the offer is not completely taken up tomorrow, Digicel may offer a further deadline extension for the remaining investors, the person said. The company’s September 2020 bond yields 35 percent, up from about 21 percent in July.

Digicel is also negotiating a separate bond swap involving debt currently due in 2022. The deadline for bondholders to accept an offer in respect of those bonds remains at December 21. The company declined to comment.

Deal Tweaks

The debt exchange offer now prohibits payments to Denis O’Brien or any entity he controls in connection with it, according to a Covenant Review report. It also restricts the ability to transfer funds to equity until the 2022 credit agreement has been repaid in full, and sets conditions for asset sale proceeds to be used to repay the agreement. The revised debt exchange also restricts the ability of the company to incur new debt secured by the equity of Digicel, Covenant Review said.

One thing that is keeping the pressure on global stock benchmarks is the plunge in oil prices.

West Texas Crude futures have dropped more than 8% in the last three sessions, with a barrel for January delivery falling as low as $47.84 this morning. Brent crude is at the lowest level since October 2017.

The sell-off is being driven by worries over increasing U.S. shale supplies, doubts over how effective the implementation of the latest OPEC+ cuts will be, and weak sentiment as global equities fall.

Source: Bloomberg

Mexican President Andres Manuel Lopez Obrador (AMLO) on Saturday sent Congress his 2019 budget plan, which includes more spending on social programs and infrastructure, while still preserving the fiscal framework established by his predecessors.

His administration expects this year’s surplus to be about 0.8%. The new administration also announced it will boost Pemex 2019 budget to US$23bln, which is 14% increase from 2018 with a focus on already producing fields in shallow waters and onshore to reduce risks.

AMLO has long promised to pay for increased spending on pensions, education, and infrastructure by a cost-cutting campaign that many investors suspect is unfeasible.

AMLO roiled markets even before taking office by canceling a partially-built Mexico City airport, sending the peso, stocks, and bonds tumbling.

Source: Bloomberg

According to Fitch, Puerto Rico will see a continued recovery in economic activity as federal reconstruction funds stimulate domestic demand.

However, structural headwinds will undermine growth as federal aid fades in the years ahead unless significant reforms are made.

Fitch forecasts real GNP growth of 5.9% in Fiscal Year 2019 (FY19; July 2018 – June 2019), from an estimated 9.1% contraction in FY18. This is an upgrade from their previous forecast of 4.8%, as the recovery in economic data has been stronger than they anticipated. 

Source: Fitch

Barita Investments Limited (BIL) has advised that their Board of Directors met on December 13, 2018, and has approved a Non-Renounceable Rights Issue of 258,064,516 ordinary shares to BIL’s Ordinary Stockholders.

The share ratio allocation for the issue will be Ten (10) additional shares for every seventeen (17) shares owned by existing BIL ordinary stockholder on record as at December 31 2018. The transaction opens on January 8, 2019 and has an offer price of $15.50 per share which is less than half the current trading price.

The offer closes on January 22, 2019 for acceptance by existing shareholders and has a final close date of January 25, 2019 for acceptance by applicants excess shares (not taken up by allotees)

Source: JSE