Major holders back NDX

Tuesday, February 19, 2013

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THREE of the four largest holders of government debt have announced plans to fully participate in the National Debt Exchange (NDX).

Scotiabank Group, Sagicor Group and Jamaica Money Market Brokers (JMMB) jointly called on investors to support the transaction.

Guardian Life Insurance and GraceKennedy subsidiaries, including First Global Bank, First Global Financial Services and Jamaica International Insurance Company, also plan to fully take up the Government's offer, which expires tomorrow.

With public sector bodies, including the National Insurance Fund, which hold 19 per cent of the domestic debt, likely to fully participate as well, the debt exchange is likely to be successful.

"Jamaica's fiscal problems are very serious, and without strong action by the Government, supported by the IMF, we would be placing Jamaica in an untenable position," said Scotiabank Jamaica's President Bruce Bowen. "We believe that without this transaction there is no IMF agreement for Jamaica; something that is needed to rebuild confidence in our economy, with our multilateral partners and international investors."

GraceKennedy's CEO Don Wehby said that his group's board approved full participation after it was decided that the "adverse impact" would be short term and would not materially affect the financial position of the group.

"The Board considered participation in the NDX to be in the best long-term interests of the shareholders of GraceKennedy Limited," he said.

JMMB said that it chooses to exchange its bonds with the understanding and firm commitment from the GOJ that they will fulfil all other prior actions necessary to secure an agreement with the IMF, which in turn will provide balance of payment support to the country and boost confidence for early stabilisation of the Jamaican dollar.

JMMB CEO Keith Duncan said that partnership between all stakeholders is critical to the economic recovery process and in realising the "fiscal stability and growth that we all desire".

"To get it right this time we need real genuine partnership," he said. "We call on the GOJ to really change the game by choosing to build trust and enter into genuine partnership with all Jamaicans."

The sequel to the Jamaica Debt Exchange (JDX) of 2010 — called the National Debt Exchange (NDX) — aims to lower the annual finance costs by $17 billion, by shaving an average of two percentage points off interest rates on $860 billion of government's domestic debt.

More specifically, the NDX, is seeking to swap 27 of the 30 JDX benchmark notes for new NDX notes, leaving $38 billion of debt untouched, apparently because they already carry coupon rates of seven to 8.5 per cent.

The transaction is a prior action required by the IMF before taking the agreement with Jamaica to its board for approval. The Government of Jamaica has stated that without a successful transaction, requiring essentially 100 per cent participation, there will be no IMF agreement.

Alternatives to the Debt Exchange in order to secure an IMF agreement might have had a devastating impact on Jamaica's financial sector, according to Richard Byles, President and CEO of Sagicor Jamaica Group.

"For too long Jamaica has failed to achieve its potential economically," he said. "As difficult as the sacrifice is being asked of investors, we must come together as a private sector and society, and make this economic programme work."




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