Grenada seeks to overhaul finances

Grenada’s new government has appointed advisers to seek a restructuring of its US$193m 2025 bond as part of a wider overhaul of the Caribbean island’s finances, which were devastated by hurricanes in 2004 and 2005 and which have been unable to recover during the wider financial crisis.

Grenada is the latest Caribbean country to tread this path, following Belize and Jamaica, which have both initiated talks with creditors this year. Prime Minister Keith Mitchell returned to power last month with a mandate to sort out the island’s economic situation.

“The global financial crisis has taken a heavy toll on the country, and aggravated the severe debt overhang that continues to weigh down our economy,” said Mitchell, whose government has appointed White Oak Advisory and law firm Cleary Gottlieb as advisers. Both have been advising Belize on its debt exchange, accepted earlier this month by investors holding 86 per cent of the bonds.

Mitchell added: “It is now time for Grenada to confront the fact that it cannot continue to pay its debts on current terms, and that the restoration of growth requires the debt overhang to be resolved. We need a fresh start, and it is therefore imperative that we approach our creditors promptly to discuss an orderly restructuring of our liabilities.”

Last October, the country, a major exporter of nutmeg, managed to issue EC$12m (US$4.4m) in treasury bills to local investors in order to meet a missed coupon on the 2025 bond within its grace period. However, Grenada has said it would not have made the coupon due on March 15. 

The country will also default on a local currency bond due in 2025. Both instruments resulted from a previous restructuring in 2005, which left the principal of the debts untouched. That deal also set out that the coupons would step up from 2.5 per cent to 4.5 per cent in September 2011. Coupons are due to step up again to six per cent this September, before increasing in 2015, 2017 and 2018, when they peak at nine per cent.

Reuters