(Jamaica Gleaner) Days after Jamaica got a ringing endorsement from the International Monetary Fund’s (IMF) top officials, Finance Minister Dr Peter Phillips and his debt management team took a chance on the international bond market, and got reception beyond expectations.
Dr Peter Phillips
The ministry got record subscriptions of US$800 million. The coupon rate settled at 7.625 per cent, below the pricing range of 7.75 per cent to 8 per cent that the market had initially expected.
Bids on the notes actually rose to US$3.8 billion or more than four times the ministry’s upsized debt-raising target.
The bond is priced to fully mature in about 10 years, in 2025, but the principal will be repaid in three annual tranches, starting in 2023.
Local pension fund managers and bond traders were bullish from early morning on the offering, which is now Jamaica’s largest global issue. Among the current outstanding global bonds, the largest is the 2039.
Foreign-exchange inflow
Traders and analysts, with whom Wednesday Business stayed in contact throughout the day, said they expected an immediate impact on the appreciation of the Jamaican dollar due to the expected inflows of foreign exchange from the bond proceeds.
BNP Paribas and Citigroup were book-runners on the transaction which opened on July 1.
The US dollar-denominated bond was rated ‘Caa3’ by Moody’s and ‘B-’ by Fitch and Standard & Poors.
Some of the proceeds will finance repayment of the Government of Jamaica’s (GOJ) €150 million bond, which matures in October, refinance other debt, and fund new investments, said the GOJ-issued guidance sheet.
Rezworth Burchenson, managing director of Prime Asset Management Limited, said after the announcement of the US$800 million issue, that it was a vote of confidence in Jamaica’s economic reform programme.
“The ability to raise US$800 million is a very positive signal to all stakeholders, indicating the confidence placed in the execution of our reform efforts. Certainly, the downward movement of the local currency will be halted, with the ability for a marginal appreciation based on the demand/supply relationship. Our fixation with the currency over the past 18 months will come to an end in the short term,” Burchenson told Wednesday Business.
Bond trading manager with VM Wealth Management Limited, Denise Marshall-Miller, said early Tuesday that she was expecting take-up from pension funds and local institutions as well as interest from hedge funds, and tier-one and tier-two accounts in Europe and other countries in the West.
“I do believe it will be well received,” Marshall-Miller said early in the day, even before interest in the offer had hit to the US$1.25 billion mark.