Barbados, IMF advance terms over funding package

Barbados, IMF advance terms over funding package

Debt Bonds Capital Markets Barbados Caribbean

Barbados has penned terms with the IMF for a four-year, $290m extended facility fund (EFF) to help the Caribbean island tackle a default and bond restructuring.

On Sunday, the government and the IMF held a joint press conference saying the EFF would be disbursed through four tranches worth $50m and four $25m portions.

The head of the IMF Barbados' delegation, Bert van Selm said the EFF was reserved for countries that needed balance of payments support and those experiencing slow economic growth.

Barbados and the IMF expect to the proposal to receive approval by early October.

Investors that spoke to LatinFinance on Friday said that beyond the agreement, bondholders remain uncertain over the sovereign's interest payments.

"Other than the immediate $50m disbursement, they have not said what happens to bondholders," one New York-based investor told LatinFinance on Friday.

"Fiscal data from a few weeks ago indicated that the budget was heavily weighted on interest rate cuts," a second bond buyer said.

Sources have said that a group of creditors led by Eaton Vance had pushed back on potential haircuts to Barbados' securities that would significantly slice into their returns.

Barbados and its advisor White Oak could not be reached for comment on Friday.

A mission from the IMF returned to the island throughout the final week of August. Sources had previously told LatinFinance that an agreement was on the cards before the end of last month.

In June, Barbados took the market by surprise when it said it planned to restructure its international bonds. Shortly after the IMF's first visit to the island, the government revised its budget for 2018 and 2019 to a primary surplus of 6% of GDP.

Prime Minister Mia Mottley's administration also set a primary surplus target of 6% of GDP through to 2022 and expects to drop this by 0.5% per year to 4% by the end of 2026.

On June 1, Barbados said it would suspend all external debt payments and try roll over domestic liabilities.

Barbados has $150m outstanding in 2021s, $200m in 2022s and $195m in 2035s. These bonds have fallen to the mid-50s in secondary trading from the low 90 cent range.

In May, Mia Mottley's center-left Barbados Labor Party (BLP) won all 30 seats in the government's House of Assembly. Shortly after that, Prime Minister Mottley unveiled a plan to address its low levels of international reserves and public indebtedness.

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