Wednesday 17 October, 2018

Barbadian investors to lose out

Governor of the CBB, Cleviston Haynes.

Governor of the CBB, Cleviston Haynes.

Government is on a path to restructure its “unsustainable” debt which will see local bondholders getting less money on their investment. 

News of this came from the Governor of the Central Bank of Barbados (CBB), Cleviston Haynes, during a breakfast meeting today where he provided members of the media with details of the debt exchange.  

Haynes explained, government has put on the table a debt exchange offer to holders of government paper- treasury bills, treasury notes and debentures, loans and bonds. This offer will see investors, including pensioners, banks and insurers receive a reduction in the interest rate of their bonds, in addition to having to wait longer to cash in.  

He said the concern about pensioners receiving a cut in bond-income is being mediated by allowing these ones to receive returns in Year 1 as opposed to other bond holders who will be forced to wait to Year 5 to receive returns on investment.  

“If we take an example of $100,000 investment, in 2019, as that is the first year you start to amortize from a pensioner’s perspective, they would get $3,076.00 but in Year 2020-2022 they will be getting $12,307.00.  

Haynes said although the adjustment will be difficult, it is necessary if government is to lower its debt and reach the targets set out in the Barbados Economic Recovery and Transformation (BERT) plan.  

“Achieving our objectives is not going to come without sacrifice, there is going to be sacrifice at all levels. Pensioners who receive bond-income will find this is part of the sacrifice which they are asked to carry. It is a shared sacrifice which everyone across the economy is being asked to make.” 

Bondholders are being given until October 5 to accept or decline government’s debt-exchange offer. However, failure to accept the offer will see bondholders not receive any returns on the investment, as government would consider it a default on the bond.  

“We will hope that persons will, in the interest of the nation, agree to the offer. If persons do not accept the offer then we will leave ourselves in a situation of limbo, in the sense that government is unable to continue to service the existing debt. You slow the whole process.” 

He added government will need acceptance from 50 percent of the bondholders or 75 percent of the dollar value of the debt to proceed.

 

 

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