In an eleventh-hour action, the Ministry of Finance yesterday sourced over $400 million to pay the principal and accrued interest on a Education Facilities Company (EFCL) bond, preventing the country from defaulting on its debt obligations.
The seven-year, fixed-rate bond, which pays annual interest of 5.35 per cent, is due to mature tomorrow, October 30, on which day the bondholders are supposed to have received their original investment.
In an advertisement published in the Express on Thursday, the EFCL signalled that it was hosting a meeting of holders of the EFCL bond on November 21 "to waive the event of default by the company," because of its failure to repay the principal and interest on the bond on October 30.
Bondholders were also being asked to agree to defer payment of the principal and accrued interest on the bond for six months from Monday, which would be April 30, 2017.
The advertisement, which envisaged the EFCL not paying off the bond by October 30, caused concern in the local financial community that the Government would default on a government-guaranteed bond that it is responsible for servicing as the EFCL is an agent of the Ministry of Education.
But yesterday, the Ministry of Finance said in a statement that it "wishes to advise that steps have been taken to effect payment of all outstanding amounts due to the bondholders by October 31st, 2016.
"The Ministry of Finance therefore wishes to stress that no event of default has occurred with respect to this bond nor does any 'debt crisis' exist at this time."
Before the ministry issued its statement, the Guardian asked Jason Julien, the deputy CEO of majority State-owned First Citizens, how he felt about the issue as a senior executive at a financial institution that holds a great deal of Government debt.
Julien said: "The Government has never defaulted on its obligations and has significant capacity to borrow commercially within the local financial sector.
"In addition, we would highlight that short extensions of repayment terms are a normal part of the business of banking and is a common practice with commercial entities within the private sector.
"Consequently, we are in no way concerned with the request for a short extension by EFCL, as reported in today's press."
The $400 million was used to partially fund the constructing of pre-schools around the country.