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Jamaica to pay down some of Petrocaribe debt

Featured Jamaica to pay down some of Petrocaribe debt
KINGSTON,  Jamaica, July 24, 2015 - Jamaica is now in a position to buy back a portion of its Petrocaribe debt after raising US$2 billion on the global market by way of the issue of two Eurobonds.
 
Investors confident in the government's economic programme were willing to lend as much as US$4.5 billion.
 
When contacted Finance Minister Dr. Peter Phillips said details on the debt buy back will be released within days. He says they will be doing some early debt payments with Venezuela. Jamaica currently owes Venezuela more than US$3 billion under Petrocaribe.
                                                        
Since the programme was conceived in 2005, Venezuela has sold more than US$28 billion of  oil to nations across the Caribbean and Central America. The countries pay for only a portion of  the bill up-front and finance the remainder at 1 or 2 percent over 25 years.
 
However, demands on Venezuela’s cash-strapped government have peaked with the collapse in oil prices, spurring the nation to reach agreements with Petrocaribe beneficiaries.
 
The larger of the two Eurobonds, maturing in 2028, has an interest coupon of 6.75 per cent, for a total value of US$1.35 billion, whilst the smaller-sized Eurobond, maturing in 2045, at an interest rate of 7.875 per cent, makes up the balance of the huge issue at US$650 million.
 

While the final maturity of the main issue is in 2028, the principal is actually to be repaid in three equal tranches in 2026, 2027, and 2028 respectively, effectively spreading out the repayment burden. In contrast, the second smaller 30-year issue maturing in 2045 has just a single "bullet" repayment on maturity.

The use of proceeds from the bonds is to purchase Jamaica's just under US$3 billion in PetroCaribe debt owed to State-owned Venezuelan oil company Petroleos de Venezuela SA (PDVSA) for US$1.5 billion, or a discount of just under 50 per cent. The remaining funds will be allocated for what the prospectus describes as general budgetary financing.

The debt buy-back, coupled with the repayment of existing maturities, is projected to reduce Jamaica's debt-to-GDP ratio to 123 per cent from 137 per cent by the end of the fiscal year in March. The additional US$500 million means that Jamaica's budget is now fully funded, including, particularly, the February 2016 National Debt Exchange maturity.

The deal also appears to give the existing PetroCaribe fund some welcome investment flexibility, as it essentially cancels half its liabilities.

 
 

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