Jamaica Weighs Debt-for-Asset Swap After Defaults, Minister Says

Oct. 31 (Bloomberg) — After two defaults since 2010, Jamaica is done with restructurings and is weighing voluntary asset swaps to cut the second-heaviest debt load in emerging markets even further, Finance Minister Peter Phillips said.”The chances are as close to nil as one can conceive” of another debt restructuring, Phillips said today in an interview at Bloomberg’s headquarters in New York. “Our debt is trending downwards. We’re still open to doing market-friendly liability management transactions.”

Following a $9 billion local debt restructuring last year, Prime Minister Portia Simpson-Miller’s government has cut tax deductions, limited public-sector wage growth and generated the first budget surplus since 1995. The International Monetary Fund said in June that Jamaica is undertaking the right policies to tackle a debt burden that will fall to 135 percent of gross domestic product in 2014 from 140 percent last year. The economy is forecast to grow about 1 percent this year.

To reduce its debt load further, the Caribbean island is considering a plan that will allow holders of those new securities to swap their bonds for government assets including buildings, plots of land, and company stakeholdings, Phillips said. Jamaica has also used revenue from its $800 million bond sale in July to buy back $40 million of local debt and will use additional funds to finance debt payments due through next year, he said.

IMF Praise
The government hasn’t finished assessing the quantity of assets available that would qualify for such a swap or determined if the transaction is legally permissible. It also hasn’t decided whether any swap will be offered to international investors, as the assets will be domestic. “It’s something we’re willing to look at,” Phillips said. “We have not developed a plan yet in this regard but we have a plan to develop a plan.” The yield on Jamaica’s dollar bonds due in 2025 has tumbled to 6.7 percent from 7.625 percent when they were sold in July. The country’s bonds have returned 21 percent this year, compared with 9 percent for emerging markets, according to JPMorgan Chase & Co.’s EMBIG index.

IMF Managing Director Christine Lagarde praised Jamaica’s progress since the restructuring during a visit in June, citing faster growth and falling unemployment in the $15 billion economy. Standard & Poor’s raised its outlook on the country to positive from stable last month, citing a doubling of international reserves to $2.2 billion.
Jamaica jumped 27 spots to 58th in the World Bank’s annual “Doing Business” report this year, led by a climb of 113 spots in the category of accessing credit and 14 spots in ease of starting a business.

Logistics Businesses
As part of its bid to lure more trade and investment, the government is marketing Jamaica as a logistics hub for the region. It is selling a concession to operate the port of Kingston, which is being dredged to accommodate larger container ships expected after the opening of an expanded Panama Canal in 2016.

“The benefits of geography, being a nearshore location is beginning to have impact,” Phillips said. “There’s a growing recognition in that marketspace of the benefits of Jamaica and we’re redoubling our efforts to attract businesses.”

By Katia Porzecanski

Source: Bloomberg

Published Date: November 4th, 2014