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.
“Jamaica intends to apply a portion of the net proceeds of its new notes offering announced on Wednesday, September 2, 2026 to purchase the Old Notes accepted pursuant to the Invitation at the applicable Total Purchase Price,” the Government said in its release.
The repurchase is expected to lower the Government’s annual interest bill by approximately US$3.5 million while moving part of its external debt obligations further into the future.
Beyond the savings, however, the reception to the new bond provides another test of how international investors now view Jamaica’s creditworthiness.
That assessment has changed significantly over the past decade.
When Jamaica raised US$2.05 billion on the international market in July 2015, its April 2028 bond carried an interest rate of 6.75 per cent while its July 2045 bond carried a rate of 7.875 per cent.
At the time, Jamaica was rated B by S&P Global, B– by Fitch Ratings, and Caa2 by Moody’s.
Today, the country carries a BB rating from S&P Global with a stable outlook, BB– from Fitch with a stable outlook, and Ba3 from Moody’s with a stable outlook.
The improvement has accompanied a steep reduction in public debt, with Jamaica’s debt-to-gross domestic product (GDP) ratio falling from approximately 116 per cent in 2015 to about 68 per cent today.
The ratings have also been maintained despite the economic damage caused by Hurricane Melissa.
Investor demand for the latest bond therefore provides another indication that international markets continue to place weight on Jamaica’s fiscal management and debt reduction record, even as the country faces significant reconstruction costs.
The comparison is even more striking against the backdrop of rising US interest rates.
The yield on the benchmark 10-year United States Treasury has recently moved close to five per cent amid a global bond sell-off. On Wednesday it was trading at approximately 4.8 per cent.
At a 6.25 per cent rate, Jamaica would, therefore, be borrowing at roughly 1.4 percentage points above the yield available on US Government debt.
That margin, known in the market as the spread, represents the additional return investors demand for taking the greater risk associated with lending to Jamaica instead of the United States.
The narrower that gap, generally, the more favourably investors are assessing Jamaica’s risk.
A comparison with Trinidad and Tobago provides some regional context.
Trinidad and Tobago, which carries stronger credit ratings than Jamaica, issued a 10-year US$1-billion bond earlier this year at 6.50 per cent and later raised another US$800 million through a 12-year bond at 6.20 per cent.
When Trinidad issued the January bond, its borrowing rate was roughly 2.27 percentage points above the US 10-year Treasury yield prevailing at the time.
Jamaica’s latest transaction, despite its lower sovereign credit rating, appears to have been priced at a smaller premium above US Treasuries.
That does not mean Jamaica is viewed as less risky than Trinidad across the board, since bond pricing is also affected by market conditions, maturity, and investor demand at the time of issuance.
It nevertheless points to strong appetite for Jamaican debt during the latest transaction.
The new unsecured bond is expected to mature in 2037, giving it an 11-year tenure.
Citigroup Global Markets Inc and Scotia Capital (USA) Inc acted as deal managers and joint lead underwriters. Cleary Gottlieb Steen & Hamilton LLP and Patterson Mair Hamilton advised the managers, while the Government was advised by Paul Hastings LLP and the Attorney General’s Chambers.