BASSETERRE, St. Kitts – IN short order, an issue of bonds will be made available by the government of St. Christopher and Nevis for its creditors to take advantage of.
The announcement was made by Prime Minister and Minister of Finance Dr. the Right Hon. Denzil L. Douglas during the most recent edition of his weekly radio programme ‘Ask the Prime Minister’.
In a prelude to the announcement, Dr. Douglas explained that the debt negotiation exercises in which the Federation entered “have been proceeding well and are now at an advanced and positive state”.
And “as a result, the government expects very shortly to launch a new bond issue which creditors will exchange for their old holdings of government debt”.
As part of this arrangement, the Finance Minister explained that “the Caribbean Development Bank is expected to guarantee interest payments on the new bond, thereby providing an additional measure of comfort to our creditors. This will simplify the debt profile of the government. It will enhance our debt management and it will reduce the government’s debt service obligations. This is responsible; this is what it is meant to do”.
This announcement was made just one week after information surfaced regarding the government’s call for bond holders to forbear, as it was unable to make the interest payments on an issue of bonds which matured on November 25, 2011.
SKNVibes understands, having perused a government-issued document published on http://sknmof.com/creditors.htm, that St. Kitts-Nevis’ creditors are being asked to select one of three bond packages known collectively as ‘Indicative Debt Restructuring Scenarios’.
If a particular creditor, for example, selects scenario A, dubbed the “30-year discount bond”, the face value of the sum owed to them would be reduced by 60 percent with “the remaining principal to be repaid in semi-annual installments” over a 23-year period. However, installments would not begin being paid until a seven-year grace period would have elapsed.
Additionally, a four percent interest rate would be applied annually until the bond matures.
The second scenario, the “25-year Discount Bond” also provides for a 60 percent reduction in the face value of the debt owed with the remainder being paid in mortgage-style monthly installments over 25 years. This scenario provides for no grace period before repayment begins.
Interest is to be paid at a rate of six percent from the date of issuance through to 2015 and from 2016 until the bond fully matures, a three percent rate would be applicable.
The last of the three, the “50-year par bond” package, doesn’t provide for any reduction of the face value of the sum owed and the principal is to be repaid in monthly mortgage-style payments over a 30-year period.
This, however, would only begin after a 20-year grace period would have elapsed. It also makes provision for a one percent fixed interest rate until the bond matures.
