THE Government of Barbados has secured BB$146.52 million from the issuance of a dual currency blue bond with Inter-American Development Bank (IDB) and The Nature Conservancy (TNC) acting as guarantors for the transaction.
A blue bond is an innovative financial tool that has the potential to grow the blue economy. Blue bonds can be issued by sovereign governments, the private sector, or by multilateral banks.
The bond issue forms part of a “Sustainability-linked Debt Conversion Financing” arranged and brokered by CIBC FirstCaribbean and Credit Suisse. Part proceeds from the blue bond issue were used to repurchase US$ bonds due 2029 and BB$ bonds due 2043, as the country pursues reducing debt service costs and improve long-term debt sustainability.
Both CIBC and Credit Suisse partnered as dealer managers for the buy-back of the US$ 2029 bonds.
This debt conversion is said to have the potential of unlocking significant funding for marine conservation over the next 15 years, Barbados is expected to allocate between US$40 million and US$50 million to marine conservation and other environmental and sustainable development projects over that time.
“As part of the debt conversion, Barbados commit to protect and effectively manage up to 30 per cent of the nation’s ocean, specifically the Exclusive Economic Zone and Territorial Sea, an area of more than 55,000 square kilometres,” a release outlined.
“The Government of Barbados, TNC and IDB agreed to work together on restructuring external and local debt, thereby significantly reducing the county’s existing debt service while securing funding for conservation activities,” it continued.
In addition to acting as guarantors, the IDB will provide sustainability advisory services and TNC will offer conservation advisory service to the Bajan authorities. Together they have offered a US$150-million guarantee for the debt conversion; the IDB guaranteeing the lion’s share of US$100 million.
Former president of the IDB Mauricio Claver-Carone, while calling Barbados a long-standing partner, commended the authorities for their “ambitious climate and biodiversity agenda”.
“Our catalytic role in this transaction demonstrates our commitment at the IDB to offer innovative financial instruments and technical advisory that increase the resilience of the region. With our expertise in international green financing, the IDB is ready to mobilise additional funds to increase resources for countries to enhance their ambition and we remain at their side to support their efforts,” he outlined further.
A unique component of the blue bond that was pioneered and championed by the Government is the suspension of debt servicing in the event of natural disasters and pandemics, which addresses the concern of debt sustainability.
“We are delighted to see the successful execution of our debt conversion for nature. Recently, Barbados has found itself at the front line of both the global pandemic and the climate crisis,” Barbados Prime Minister Mia Amor Mottley noted.
“Our response has been to find innovative ways to strengthen our resilience and to address the challenges that face us, not least the climate crisis. This operation is the culmination of a lot of hard work, and of our determination to support our precious and irreplaceable marine environment which must equally be sustainably developed and managed,” she added, while thanking IDB, TNC, lenders, bondholders, and all other parties involved in the transaction.
Underscoring the importance of the transaction to the protection and conservation of Barbados’ marine resources, as well as the way of life of Bajans, the prime minister said the country had to take action while waiting on the international community to treat with the damaging effects of climate change.
Another stipulation of the transaction is the creation of a new, independent conservation fund, which will receive US$1.4 million annually or US$20.5 million in total, to underwrite coastal conservation projects. Over the next 15 years, US$18 million will be directed to an endowment fund set aside for marine conservation and accessible in 2037 to aid the long-term planning and protection of Barbados’ marine ecosystem.
Also commenting on the transaction, Jennifer Morris, CEO of The Nature Conservancy, said that it “has positive ramifications for conservation efforts and for our communities, and we hope to continue to scale this programme to other countries around the Caribbean and the world.”