By NEIL HARTNELL 

Tribune Business Editor 

nhartnell@tribunemedia.net

THE Government has beaten its debt buy back target by agreeing to repurchase almost $216m in Bahamian foreign currency bonds that were listed and traded on major international stock exchanges.

The total to be acquired, using financing from a $300m loan provided by Standard Chartered bank, slightly exceeds the original $210m goal and was disclosed in a statement issued on the

Government’s behalf before global markets closed on Friday.

The release revealed that the Government received $445.817m worth of offers by investors to sell their holdings of Bahamian sovereign bonds spread across six different issues with principal maturity dates ranging from 2028 to 2038. The $215.687m to be repurchased means that the Davis administration accepted just under half, or 48.3 percent, of investor offers.

Neither Simon Wilson, the Ministry of Finance’s financial secretary, nor Michael Halkitis, minister of economic affairs, responded to Tribune Business calls and messages seeking comment before press time last night. However, the combined value of the offers accepted by the Government following the transaction’s closing represents just 8.8 percent of the combined $2.425bn in principal covered by the outstanding bond issues.

The rationale for the debt buy back, and strategy behind it, have yet to be fully disclosed although the Government is likely to be exchanging highercost bonds for a Standard Chartered loan carrying a lower interest rate, later maturity date and more favourable terms. And the interest savings generated are supposed to finance a conservation trust fund set up by the Government to help safeguard the marine environment.

The transaction thus has some characteristics of a so-called debt-for-nature swap. The Bahamas is also understood to be working on a similar such transaction, possibly worth up to $500m, 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.

The Government, as part of its core debt management objectives, also seeks to keep its debt servicing (interest) costs as low as possible while also spreading out the maturity dates of its international bond issue so that it does not have to come up with substantial sums of foreign currency to finance repayment at the same time.

Both these goals are likely to be involved here, although the $215.687m buy back is likely one piece in a much bigger debt management puzzle. And one source, speaking on condition of anonymity, yesterday queried whether the Standard Chartered-financed deal is at least partially an effort to reduce pressure on The Bahamas’ sinking funds.

These vehicles were created to accumulate foreign currency assets and earnings that will be used

to finance repayment of bond principal to international investors when these issues mature. However, during the 2023-2024 fiscal year, more than half the assets - some $203m - in these sinking funds were drawn down - a move likely undertaken to help the Government cover its deficit without resorting to more borrowing.

The $203m is a similar sum to the $216m involved in this latest debt buy back, and the source said: “The drawdown on the sinking funds feeds into this. They [the Government] did not get the chance to rollover the debt they wanted to last year. They couldn’t find the financing. Now they were able to finally source some financing.

“I think this is tied to the fact they’ve drawn down on the sinking funds and those assets are no longer there to finance future repayments.” They added that it was impossible to properly assess the buy back, and its impact on the Government’s debt management strategy, without first knowing the rationale or how the bonds compare to the interest rate, maturity, and terms on the Standard Chartered loan.

However, more than $190m of the accepted investor offers - some 88.5 percent - relate to the three international foreign currency bond issues that mature first in 2028 and 2029. Those are just four and five years away from happening, and involve bonds with interest coupons of 6 percent, 9 percent and 6.95 percent.

The Government accepted $140.664m, or 59.9 percent, of the $234.768m bonds tendered by investors in the first issue due to mature in 2028. It also accepted $24.107m and $26.126m of offers concerning the two bond issues maturing in 2029 - sums accounting for close to two-thirds of what was tendered by holders.

In total, investors offered to sell back to the Government some $445.817m of its debt - a figure representing 18.4 percent of the total collective $2.425bn outstanding spread across the six issues. Settlement of the transaction is due to occur on November 25, 2024.

“The Government has, pursuant to the terms set forth in the offer to purchase, increased the maximum aggregate consideration amount to $215.687m excluding accrued but unpaid interest, which will also be paid on the notes accepted for purchase,” the Government’s Friday statement said. This compared to the initial $210m target.

The initial offering document, which was obtained by Tribune Business, stated: “The offer is part of the Government’s refinancing transaction, whereby the Government has entered into a $300m senior unsecured term facility, dated November 7, 2024, with Standard Chartered Bank (Hong Kong) as the lender under which it will procure a loan.

“All or a portion of the proceeds of the loan under the facility are expected to be used to conduct the offer and fund transaction fees and expenses related to the transactions contemplated by the facility. A portion of the proceeds of the loan under the facility may also be used to refinance other Government indebtedness.

“The net savings generated by conducting the offer and, if applicable, refinancing of other Government indebtedness out of the proceeds of the loan under the facility, will be applied to fund the Government’s payments to a conservation trust fund for the duration of the facility pursuant to a conservation agreement in order to promote certain government marine conservation objectives.”

The Davis administration ever since taking office has looked for creative ways to access relatively low-cost foreign currency financing while avoiding the global bond markets, such as the $200m-plus repo or repurchase transaction with Goldman Sachs and the growing reliance on pol- icy-based guarantees from multilaterals such as the Inter-American Development Bank (IDB).

A key influence is likely to have been Rothschild & Co, the major financial group hired to advise the Government on its debt strategy back 2022, and which is named as the adviser in the $210m ‘buy back’ offering.

This newspaper reported then that the bank, which has some 3,800 employees across 40 countries, was hired to help navigate the way forward after Hurricane Dorian and COVID-19 sparked a debt blow-out that worsened already-deepening fiscal woes.