Funding for the buyback came from Standard Chartered Bank US$300 million loan

Durrant Pate/Contributor

The Government of Bahamas has upped its bond buy back target by US$8 million having agreed to repurchase almost US$216 million in Bahamian foreign currency bonds that were listed and traded on major international stock exchanges.

This was disclosed in a statement issued on the Government’s behalf before global markets closed last Friday. The total amount acquired slightly exceeds the original US$210 million goal. 

Funding for the bond buyback came from a US$300 million loan provided by Standard Chartered Bank. The Government received US$445.82 million worth of offers from investors to sell their holdings of Bahamian sovereign bonds spread across six different issues with principal maturity dates ranging from 2028 to 2038. 

Overwhelming investor interest

The US$215.69 million to be repurchased means that the Phillip Davis administration accepted just under half, or 48.30%, of investor offers. 

The combined value of the offers accepted by the Government following the transaction’s closing represents just 8.80% of the combined US$2.43B billion in principal covered by the outstanding bond issues. 

The rationale for the debt buyback has yet to be fully disclosed. However, the Government is likely to be exchanging higher-cost bonds for a Standard Chartered loan carrying a lower interest rate, later maturity date and more favourable terms. 

The interest savings generated from this buyback should finance a conservation trust fund set up by the Government to help safeguard the marine environment. The transaction thus has some characteristics of a debt-for-nature swap. 

The Bahamas is also understood to be working on a similar transaction, possibly worth up to US$500 million with the Inter-American Development Bank (IDB) – a deal that the latter’s president recently confirmed is being worked on in an interview with international media. 

Securing the US$500 million IDB loan would allow the Bahamas to refinance an additional 22.60% of outstanding debt at a more favourable rate. This would mean lower debt servicing costs, unlocking more funds for investments in domestic projects and reducing the sovereign’s fiscal deficit.