INVESTORS SNAP UP JAMAICA BOND

NEARLY 10 months after Hurricane Melissa inflicted an estimated US$8.8 billion in damage across Jamaica, international investors have turned out strongly for the Government’s latest US$1-billion bond, allowing the country to borrow at a lower rate than initially indicated. The bond was heavily oversubscribed after Jamaica returned to the international capital markets last week to raise funds for both debt management and general budgetary needs. Before the offer was formally launched, investors were initially being guided to an interest rate of about 6.50 per cent.

Strong demand subsequently allowed the Government to offer the bond at 6.25 per cent, according to market sources. In simple terms, investors wanted more of the bond than Jamaica was seeking to sell, giving the Government room to offer a lower return and still attract sufficient buyers. The Government of Jamaica’s US$1-billion bond was oversubscribed on Thursday.

(Photo: Naphtali Junior) The strong reception is particularly notable given Jamaica’s return to the market less than a year after Hurricane Melissa caused widespread damage and disrupted economic activity. Of the US$1 billion being raised, approximately US$600 million was earmarked to help repurchase portions of three older Government of Jamaica global bonds, while the remaining US$400 million, or about $63 billion, was intended for general budgetary purposes. The transaction forms part of the Government’s wider liability management strategy, under which it is seeking to replace portions of older, more expensive debt with new borrowing while pushing some repayments further into the future.

At the same time that the new bond was being marketed, the Government invited holders of its 6.75 per cent notes due in 2028, 8.50 per cent notes due in 2036, and 8.00 per cent notes due in 2039 to sell some of those securities back to Jamaica. By the time that tender offer closed on September 9, investors had submitted approximately US$476.62 million in bonds for repurchase. After adjusting for the amortisation of the 2028 notes, the amount represented approximately US$392.23 million.

The Government is expected to determine how much of those tendered notes it will accept, with settlement scheduled for September 17. The official tender documents confirm that completion of the buyback is tied to the closing of the new international bond transaction.