Holders of the Guymine bonds have accepted the government’s payment offer of 90% on the US$21M and four million euros bonds and an agreement to this effect will be signed within two weeks.
The government’s decision to pay comes almost a year after it defaulted on the bonds and sought Paris Club Terms debt relief for up to 90% of their value. The government’s default on the bonds had sparked widespread consternation in the business community here but despite this the government was adamant that it would not pay the face value. The new deal comes very close to that.
Alan Parris Managing Director of Citizen’s Bank, which is a major bondholder, confirmed that an offer of 90% of the bonds’ face value was made and the other sub-participants, some 15, and Citizen’s Bank have accepted the offer.
He told Stabroek News that although the effective date for the offer was yesterday, certain formalities and legal requirements must be followed and within two weeks these should be concluded.
In the first week of June last year, Citizen’s Bank sued the government for defaulting on the 12-year US$21M and four million euros bauxite bonds issued in 1994, and which matured on May 17, 2006.
After the lawsuit was filed, the government said in a statement that it could not honour the bonds because it would breach terms under the Paris Club Agreed Minute in 2004.
The government said Clause 111, Paragraph 1 of the Agreed Minute prevented it from honouring the bonds. This clause states: “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.”
The suit has engaged the attention of the High Court since and last month the case was adjourned to February 8.
The negotiations, Parris said, have come a long way and although “100% in most cases is better than 90%,” the bank has accepted the offer, which was termed by the government as the “final offer.”
When the government announced its position on the bonds, the securities sector expressed concern that this move would damage the country’s secondary market and its credit rating.
The 90% offer was made during a meeting on January 12 at the Office of the President that included all the sub-participants. Parris said that after the offer was made, the bank and the sub-participants had to analyze it before making a decision.
Last week when Parris was asked for a comment on this issue, he had said that a meeting was scheduled. Yesterday he noted that the meeting was between the sub-participants and not with the government.
The managing director said one or two sub-participants took longer than others to reply to the offer, since they had not completed their analyses.
The government has also agreed to pay 5% interest up to the time the bonds matured (May 17, 2006) and then up to the date of settlement (January 31, 2007) on the face value of the bonds.
The government’s last interest payment on the bonds was on December 31, 2005.
The sub-participants in-clude Hand-in-Hand Trust Corporation, Hand-in-Hand Life Insurance Company, several pensions managed by Hand-in-Hand, Demerara Bank, GT&T pension fund, Guyana & Trinidad Mutual Fire, Guyana & Trinidad Mutual Life, Guyana Cooperative Insurance Service and four or five other individuals.
President Bharrat Jagdeo said on Thursday that the government had reached an “amicable settlement to the outstanding Guymine Bonds”, during a media briefing at the Office of the President.
During the time of the issuance, Guymine was a government-owned bauxite mining company. It was restructured into two separate entities, Bermine and Linmine.
As part of the restructuring of Guymine, the then government assumed the US$28.4 million liabilities of Guymine in June 1992.
Subsequently, on May 17, 1994 in lieu of the substantial outstanding debt owed by Guymine to its creditors, the then PPP/C 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. The government has said that over US$18M was paid in interest on the bonds and noted a case where the bonds were bought for as low as 15% of its face value by Citizen’s Bank. It is a claim that Citizen’s Bank has denied.
