The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Environmental advocates are voicing hope that the Government’s first $300m ‘debt-for-nature’ refinancing will “open the door” for further such initiatives “to propel” The Bahamas towards true climate resiliency.

Rashema Ingraham, Bahamas-based Caribbean programme director for the Bonefish & Tarpon Trust (BTT), told Tribune Business that the $124m savings forecast to be unlocked will form “one of the building blocks” for enhanced conservation and management of marine ecosystems that support fisheries and other ocean-based, ‘blue economy’ activities.

Speaking after the Government pledged to direct these savings, generated from refinancing $300m of its existing debt at lower interest costs, to environmental preservation, sustainability and building enhanced climate resiliency, she said: “It really shows that we are no longer putting a deaf ear to the work of conservationists in The Bahamas, especially because so much of our livelihoods depend on the environment around us.

“Whether it be the land or marine environment, I’m hoping part of this blends into the policy development that needs to be part of the conservation effort - strengthening the policy, so that it also includes the enforcement component and provisions that allow the law to work and protects the work environmentalists and conservationists do over time.

“The work we’re doing in conservation is very expensive, and there’s very little funding to support that work many times. This announcement is one of the building blocks that is needed to propel us into a very sound, environmentally-friendly country that benefits from strong ecosystems.”

Ms Ingraham also voiced optimism that the debt-for-nature refinancing via a $300m loan from Standard Chartered bank, which is effectively 100 percent underwritten or guaranteed by the Inter-American Development Bank (IDB) and private sector partners, affirms that the Government is moving away from industries such as exploratory oil drilling that are potentially harmful to the environment.

“It also says to me, as a conservationist, as someone in the space, that we are now moving away from these industries that harm our environment,” Ms Ingraham added. “We are committed to focusing more on conservation rather than harmful or extractive industries, and we’re willing to swap debt as a form of our commitment.”

Ms Ingraham described the $124m, which amounts to an average $8.27m in funding per annum spread over a 15-year period, as a “good start” but said much more is needed to make The Bahamas truly resilient against climate change while protecting its ocean environment and the natural assets that it contains, such as coral reefs, seagrass meadows and mangrove forests.

“It’s a good start, definitely a good start, but a good start with the hope this opens the door for more opportunities equal to it,” she told Tribune Business. “We definitely need more ways to strengthen our economy and we’ve been talking about the diversification of it, but that equally has to involve the environment and the protection of it.

“Good start, we hope for more to come, and hope for it to be that things remain inclusive for all environmental stakeholders, including micro, small and medium-sized entities, non-profits and non-governmental organisations (NGOs).” Ms Ingraham said correct management of these funds and the groups involved will be key to “proper execution”.

Michael Halkitis, minister of economic affairs, explained that the interest savings have been generated because the Standard Chartered loan refinanced a portion of the Government’s existing debt at a much lower coupon. The new 15-year loan has “a highly favourable” average interest rate of 4.7 percent, which compares to rates of between 6 percent and 9 percent on $191m worth of bond debt that this is refinancing.

The minister explained that the low rate was achieved because Standard Chartered’s credit facility is “fully underwritten” by a “comprehensive credit enhancement package” provided by the IDB and other partners. Besides the multilateral lender’s $200m guarantee, the loan is also backed by a $79m “collateralised guarantee” from Builders Vision and $30m in credit insurance from the insurer, Axa XL.

Together, these guarantees equal the loan amount and significantly lower Standard Chartered’s risk in advancing the credit because its repayment has been affirmed. Builders Vision, which was founded by Lukas Walton, grandson of Wal-Mart’s creator, Sam Walton, helps to address environmental sustainability challenges in areas such as the ocean, energy and food and agriculture.

Confirming that the $300m ‘debt-for-nature’ refinance includes the $216m bond buy back reported in Tribune Business last Monday, as well as other debt previously issued by The Bahamas, the minister said the move is “expected to generate $124m in nominal cash savings representing 41.2 percent of the new facility’s size, which will be ear-marked for marine conservation in The Bahamas over the next 15 years”.

Mr Halkitis said the transaction “provides wins in so many areas”, including for the Government’s own financial position by reducing its debt servicing (interest) costs and spreading out debt maturities over an extended period of time so that it is not faced with multiple bond issues and loans becoming due for repayment all at once.

It also provides increased funding for marine conservation and sustainability efforts that will support industries such as fisheries and the wider ‘blue economy, while also enabling The Bahamas to build greater resiliency against sea level rise, more frequent and powerful hurricanes, and other symptoms of climate change.

The Opposition, though, was far less generous in its praise of the Government’s transaction. Michael Pintard, the Free National Movement (FNM) leader, argued that the Davis administration was really taking credit for new borrowings it would not have incurred if it had not spent $203m from the ‘sinking fund’ assets to help cover the 2023-2024 fiscal deficit (see article on Page 3B).

The ‘sinking funds’ represent assets set aside by the Government to repay bond principal when it matures and becomes due for repayment to lenders - including the very same $218m that has just been refinanced in the ‘debt-for-nature’ transaction. Mr Pintard argued the deal would not have been necessary if the Government had left the ‘sinking funds’ well alone.

Mr Halkitis said the $124m savings generated will “go directly” to the Bahamas Protected Areas Fund (BPAF), which will manage the monies. The BPAF’s grants technical committee will review all funding proposals to determine if they qualify, while some monies will be directed to the creation of a $20m endowment so that there will be a permanent financing source beyond the 15-year Standard Chartered loan.

Tribune Business understands that the financing is likely to be split between government agencies that have environmental-related responsibilities and the private sector and NGOs. Questions and concerns have already been raised among Bahamian environmentalists over who will gain access to this funding.

Nikita Shiel-Rolle, who goes by the name ‘Eagleray Empress, posted on social media: “Progress looks like all the Bahamian organisations having fully financed budgets. It would be great if this allocates resources for the Bahamian organisations, but if all funds go to US-based entities implementing in The Bahamas that will be disappointing. Standing by to learn more.”