Restructuring to Restore 

13 April 2015


The Spice Isle also known as Grenada an eastern Caribbean island with a population of 110,000 took a ground-breaking approach this week as it reached a restructuring deal with bond creditors that include a two-phase haircut and special warrants related to the Caribbean island’s citizenship-by-investment programme.

This deal is loaded with some heavy spice, which covers some US$262 m of international and local bonds on which the island defaulted in early 2013, ends lengthy negotiations with creditors, who have agreed to in principle to a 50% loss on the face value of their holdings.

 

Only half of nutmeg coated deal will take place upfront. The remainder will be subject to Grenada’s successful completion of an existing three-year programme with the IMF, which is expected to end in 2017 or within the first quarter of 2018.Bondholders are to receive new 15-year amortising bonds carrying a coupon of 7% in exchange for their holdings. Also as a spicy bonus for their losses, bondholders will also receive a portion of the revenues that may be generated by the island’s Citizenship by Investment program, which aims to attract capital by offering foreigners local citizenship in exchange for investments in real estate projects or donations to a government fund.

Grenada will receive debt relief worth 19% of its GDP through the restructuring, a much-needed reprieve considering that the country’s total public sector debt reached 111% of GDP in 2014, according to IMF estimates.
Grenada’s defaulted 2025 bonds are currently trading 32 cents on the dollar.

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