The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A major stock exchange has temporarily suspended trading in several of The Bahamas’ outstanding foreign currency bond issues while the Government attempts to buy back up to $210m of its debt.

Tribune Business can reveal that two of the bonds currently suspended by the Frankfurt Stock Exchange, the $850m issue due to mature in 2032 and the $300m bond whose principal is set to be repaid in 2029, are included in the Government’s offer to buy back debt from private investors that was launched on Thursday, November 7.

The Government’s buy back is being financed by a $300m loan from Standard Chartered Bank’s Hong Kong branch, which will fund both the bond debt repurchases and may be used to “refinance other government indebtedness”.

Neither Simon Wilson, the Ministry of Finance’s financial secretary, nor Michael Halkitis, minister of economic affairs, responded to Tribune Business calls and messages before press time last night. However, there is nothing sinister or untoward about the trading suspensions, as these are typically imposed worldwide when an issuer such as The Bahamas is seeking to buy back its own securities to maintain an orderly market. 

The $210m buy back offering document, which has been obtained by Tribune Business, states: “The offer is part of the Government’s refinancing transaction, whereby the Government has entered into a $300m senior unsecured term facility, dated November 7, 2024, with Standard Chartered Bank (Hong Kong) as the lender under which it will procure a loan.

“All or a portion of the proceeds of the loan under the facility are expected to be used to conduct the offer and fund transaction fees and expenses related to the transactions contemplated by the facility. A portion of the proceeds of the loan under the facility may also be used to refinance other Government indebtedness.

“The net savings generated by conducting the offer and, if applicable, refinancing of other Government indebtedness out of the proceeds of the loan under the facility, will be applied to fund the Government’s payments to a conservation trust fund for the duration of the facility pursuant to a conservation agreement in order to promote certain government marine conservation objectives.”

No explanation or rationale for the move has been provided to a Bahamian audience at home in The Bahamas. However, based on the offering document, it appears to be part of the Government’s debt management operations where it is seeking better terms - either reduced debt servicing and interest costs to lower the burden on Bahamian taxpayers, and/or extend out further the maturity profile of its debt.

And any savings generated by reduced interest costs will seemingly finance the Government’s conservation and climate change initiatives here in The Bahamas. The $210m target, though, is only about one-twelfth of the $2.4bn debt covered by the six bond issues that are subject to the buy back.

“The Government has offered to purchase for cash up to an aggregate consideration amount, with respect to all series, of $210m excluding accrued but unpaid interest, which will also be paid on the notes accepted for purchase pursuant to the offer,” the release announcing The Bahamas’ offer said last Thursday.

The Government is under no obligation to accept any investor offers to sell their bonds ahead of this Thursday’s planned close, with the results set to be announced this Friday and all transactions to be settled on November 25, 2024, just prior to the Thanksgiving holiday. Standard Chartered itself is acting as the offering’s “deal manager”.

However, other sources have queried whether the offering represents swift action on the Government’s part to scoop up any bonds coming on the market and maintain both their price and yields at existing levels. They suggested that The Bahamas may have got wind that a major investor or group of investors were planning to unload their bond holdings at a major discount to the existing market.

That could not be confirmed before press time. However, the Davis administration ever since taking office has looked for creative ways to access relatively low-cost foreign currency financing while avoiding the global bond markets, such as the $200m-plus repo or repurchase transaction with Goldman Sachs and the growing reliance on policy-based guarantees from multilaterals such as the Inter-American Development Bank (IDB).

A key influence is likely to have been Rothschild & Co, the major financial group hired to advise the Government on its debt strategy back 2022, and which is named as the adviser in the $210m ‘buy back’ offering. This newspaper reported then that the bank, which has some 3,800 employees across 40 countries, was hired to help navigate the way forward after Hurricane Dorian and COVID-19 sparked a debt blow-out that worsened already-deepening fiscal woes.

Rothschild & Co, in its capacity as the Government’s independent debt adviser, was to have multiple tasks and responsibilities. These include “figuring out how to manage” The Bahamas’ international foreign currency debt exposure, both reducing the cost (interest payments) on outstanding bonds and minimising the rates demanded by investors on future issues.

Its executives were also charged with selling The Bahamas’ post-COVID recovery progress to the international markets amid the belief that this will be more credible coming from Rothschild & Co, which knows the investors and players as a participant itself, than the Government.