Jamaica extends exchange offer, marks 97% participation rate so far

By Angela McDaniels

Tacoma, Wash., Feb. 26 - The Government of Jamaica said it will accept and settle tenders for more than 97% of the bonds eligible for its exchange offer. In addition, the offer has been extended to Feb. 28 from Feb. 21.

The offer targets roughly J$860 billion of debt issued in the Jamaican local market.

Transactions settled during the extension period will be treated as if settled on Feb. 22, according to a government news release. If any bonds pay interest in the interim period, adjustments will be made to provide for equivalent treatment.

When the offer began on Feb. 12, the government said it is a critical part of its economic program and is an essential step in finalizing an agreement with the International Monetary Fund.

"Our debt level and the associated servicing cost is our fundamental problem. With a debt-to-GDP ratio of over 140%, using the IMF estimates, the county cannot finance development activities and the social services so badly needed by our people. We need to address this problem, and this will require sustained focus and shared burdens," Peter Phillips, minister of finance and planning, said in a letter to bondholders.

Holders must be Jamaican residents in order to participate in this offer.

New notes

The new notes to be issued through the offer have a lower coupon and in most cases are three to five years longer in maturity than the old notes.

In exchange for old notes, the government is offering

• Floating-rate benchmark notes denominated in Jamaican dollars with margins from 25 basis points to 50 bps and maturities from 2018 through 2035;

• Fixed-rate benchmark notes denominated in Jamaican dollars with coupons from 7¼% to 12¼% and maturities from 2016 to 2050;

• 5¼% benchmark notes due 2020 denominated in U.S. dollars; and

• 10% fixed-rate accreting notes due 2028 denominated in Jamaican dollars.

The exact series of notes that holders can choose to receive depends on the series of old notes held.

Holders who make offers to receive new benchmark notes will receive an equal amount of new notes denominated in the same currency as the exchanged notes.

Holders who make offers to receive fixed-rate accreting notes will receive J$80 principal amount of notes in exchange for each J$100 principal amount of old notes. The principal of the new notes will accrete to J$100 by the maturity date.

Holders will also receive accrued interest up to but excluding the settlement date net of applicable withholding taxes.

Additional options

In addition, there are two special options for participating in the transaction.

Under the retail option, those holding old Jamaican dollar-denominated notes maturing during 2013 or 2014 with an aggregate principal value of J$25 million or less may make retail offers to receive new retail Jamaican dollar-denominated notes due Feb. 24, 2014 with a 7% coupon.

Similarly, those holding U.S. dollar-denominated notes with an aggregate principal value of US$200,000 or less may make a retail offer to receive new retail U.S. dollar-denominated notes due Feb. 24, 2014 with a 5% coupon.

Finally, the holders of certain old notes may choose to receive new inflation-indexed notes due 2040 with step-up coupon. These would be in addition to the new benchmark notes or fixed-rate accreting notes.

Questions can be directed to the following people at the Ministry of Finance and Planning: Pamella McLaren, senior director (876 932-5400), Dian Black, director (876 932-5402) and Audrey Duncan (876 932-5424).

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