By Linda Straker
ST. GEORGE’S, Grenada, CMC – The Grenada government will defer more than US$$17 million in total payments to government bondholders because of the devastation caused to the island following the passage of Hurricane Beryl on July, 1, leaving damage estimated at US$30 million.
The Dickon Mitchell administration is yet to make an official statement regarding the payment to bondholders, but the government’s press secretary, Neila Ettienne, in a WhatsApp message confirmed the government had triggered the hurricane clause in the bond.
International media houses had reported that Grenada became the first country in the world to use a so-called hurricane clause in a government bond, a special feature that allows authorities to postpone debt payments in the wake of a major natural disaster.
In a notice to the holders of one of its international bonds, the Ministry of Finance said it had “elected to make a deferral claim as a result of the event”, adding the “modelled loss” to the economy from Beryl was greater than US$15 million.
“It means Grenada will not make the bond’s next scheduled payments due on November 12 and May 12 next year, which combined add up to just over $12.5 million. Instead, the money will be added on to the US$112 million bond’s subsequent lump sum “principal” payments until the end of its term in 2030,” said the notice.
Grenada has elected to make a deferral claim as a result of the event. As the modelled loss is greater than US$15 million, the deferral dates as a result of the event include each of the next two consecutive payment dates explains the letter in which the London-based independent financial advisory firm, White Oak Advisory, that acted as the financial advisor, and the international law firm, Cleary Gottlieb Steen & Hamilton LLP, which acted as the legal advisor to the Grenada government.
Grenada included the hurricane clause in 2015 after a previous hurricane led to two debt restructurings in the space of a decade.
Over the period December 2014 to November 2015, debts amounting to US$318 million or one-third of Grenada’s total public debt were restructured with three creditors: the Export-Import Bank (the Eximbank) of the Republic of China (Taiwan), holders of Grenada’s previously restructured 2025 sovereign bond, and Grenada’s Paris Club creditors Hurricane clauses were negotiated in all three agreements.
Their provisions differed markedly, with the Eximbank’s deal most closely aligned to Grenada’s request. The 2025 bond holders offered a less flexible version of Eximbank’s hurricane clause, while the Paris Club provision differed considerably.
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