| Government to Pay Bondholders in March |
| By L.K. Hewlett |
| |
|
|
|
Prime Minister Hon. Dr. Denzil Douglas |
|
|
|
|
| |
Holders of St. Kitts-Nevis government bonds could see some payment of owed interest as early as March. The Federation defaulted on interest payments on US 75million dollars in domestic bonds in November 2011; the first time in the country’s history. Prime Minister Hon. Dr. Denzil Douglas, who holds the Finance portfolio, said that on the advice of debt advisors London-based consultants, White Oak Advisory, government “would hold the payment of interest on these bonds”.
On November 30 the Eastern Caribbean Securities Exchange (ECSE) posted a notice of non-payment of interest on SKN government’s 10-year bond on its website saying its Registry was unable to make the 18th interest payment on the bond which became due on November 25, 2011, “due to non-receipt of the necessary funds”.
The ECSE also posted a message to Holders of Government of St Kitts and Nevis 7.5% Bond due 2012 saying “the unavailability of sufficient funds to service all of the maturities falling due on debt that is eligible to be restructured means that the Government is not able to make the coupon payment on the above captioned security on November 25, 2011”.
The Prime Minister was adamant that government had not defaulted on the payments but had simply “deferred” them. He said he would negotiate with bondholders for them to take a “haircut” to the tune of a 60% loss on their investment.
Last Wednesday (Jan 25), in response to a question posed by The Observer during his monthly press conference, Prime Minister Douglas informed that it was possible bondholders and other creditors would be paid owed monies by the end of the first quarter of 2012.
“Hopefully they should be paid by March,” he said.
He said this would only materialize once the debt restructuring program the country is pursuing with the IMF was complete. Under this program he explained, the country could not pay some of its creditors before others.
“People have a right to know that when they have invested their money under specific terms that they realize the returns of the investment; but there was the principle that we were pursuing as we negotiate with our creditors in a debt restructuring exercise, it is the principle of inter creditor equity.
“You cannot in July of last year when you started the exercise of debt restructuring, halted or deferred payment of some of your creditors and then later on you are going to pay some.”
He explained that all creditors must be treated with equity as part of the Economic Development Program. Bondholders who were owed interest payments from last November would have to hold their horses, Dr. Douglas said.
“We can’t really pay some creditors their interest payments when due and some others you don’t pay. And what happened in November with regard to the 75 million dollar US bond that was issued for 10 years on the RGSM (Regional Government Securities Market), what we said was hey, we are presently into debt restructuring exercises, hold your horses for a while then you’ll receive the full payments when we would have completed the exercise and the new offer of a new bond is being made then you will be paid.”
Once that new offer of a new restructured bond would have been agreed to then all outstanding payments that government has deferred would then be made, he informed. This payment plan also applies to holders of NIA bonds who were also stiffed when the bonds recently matured.
“Once it was part of the national debt of Nevis that was being restructured and it has been withheld, once the new bond would have been issued and Nevis’ debt is included in that instrument, then of course we expect that the payments would then be made. That’s what we have been advised,” PM Douglas said.
The country’s default could have serious implications for its fellow OECS and ECCU member states as this has undoubtedly impacted investor confidence in regional government securities instruments.
Prime Minister Douglas however denied discussing the bond payment default with his colleagues at the January 14 ECCU meeting in Antigua. He also denied the rumor that the member states and other creditors were not willing to accept less than half of their owed revenue.
Opposition Leader Hon. Mark Brantley has described the November 2011 default as “humiliating”, saying it spoke to the “failed leadership in Basseterre who used to say that the debt did not matter”. |
