The government and its creditors have reached an “amicable settlement” on the bauxite bonds issue, President Bharrat Jagdeo announced on Thursday.
Speaking during a media briefing at the Office of the President, President Jagdeo said, “we are pleased with the outcome,” though he declined to give details on the deal, stating that more information will be forthcoming in the weeks ahead.
However, Citizen’s Bank Managing Director Alan Parris said yesterday through his secretary that the bank and the government had a meeting scheduled for yesterday, after which further discussions are expected to be held on the bond issue. He did not confirm whether an “amicable settlement” had been reached. Citizen’s holds many of the bonds in question.
In the first week of June last year Citizen’s Bank Ltd sued the government for defaulting on the 12-year, US$21 million and four million euros bauxite bonds issued in 1994, and which matured on May 17, 2006.
After the lawsuit was filed, the government in a statement said that it could not honour the bonds because it would breach a Paris Club Agreement.
The government stated that Clause 111, Paragraph 1 of the Agreed Minute prevented the government from honouring the bonds. This Clause says: “Consequently, the Republic of Guyana commits not to accord any category of creditors – and in particular creditor countries not participating in the present Agreed Minute, commercial banks, suppliers and bondholders (in particular the former debt of Guymine) – a treatment more favourable than that accorded to the Participating Creditor Countries.”
This matter has engaged the attention of the High Court since, and earlier this month it was adjourned to February 8.
The Attorney General in arguments presented last year had stated that the government should not be held to a time frame to pay Citizen’s Bank Ltd, while Citizen’s Bank has maintained that the deadline for payment has already passed.
When the bonds were issued, Guymine was a government-owned bauxite mining company. As part of the restructuring of Guymine, the then government assumed the US$28.4 million in Guymine liabilities in June 1992.
Subsequently, on May 17, 1994, in lieu of the substantial outstanding debt owed by Guymine to its creditors, government issued the bonds in question to 18 different creditors of Guymine, the largest of which were Green Mining Inc, Esso Standard Oil Ltd, Boskalis International BV and Caterpillar Americas Company. The bonds were issued so as to pay interest retroactively for the period commencing on June 19, 1992.
Guymine was later restructured into two separate entities, Bermine and Linmine.
Citizen’s Bank subsequently bought a large quantity of these bonds at a discount and through sub-participation agreements. Around 20 to 25 institutional investors and others including several pension funds hold the bonds.
The government has said that over US$18 million was paid in interest on the bonds and that in one case the bonds were bought for as low as 15% of their face value by Citizen’s Bank. It is a claim that Citizen’s Bank has denied. The government had been severely criticized for defaulting on the bonds.
