NO DEFAULT! – Gov’t narrowly avoids defaulting on US$193M bond payment

THE Grenada Government said last Friday that it has completed payment of the semi-annual September coupon of the US$193 million 2025 Bond through its paying agent, thereby avoiding a default of payment to the noteholders.

On September 12, 2012, the Government of Grenada issued a Notice to Noteholders of its US Dollar 2025 Bond through its Paying Agent, BNY Mellon, that it was experiencing liquidity constraints but would make every effort to pay the coupon by October 15, 2015, the final day of the grace period for the payment of the September coupon on the 2025 Bond.

Grenada was scheduled to make an interest payment on the US$193 million bond on September 15, 2012, but in the September 12 statement to bondholders, the Government let investors know that it would be unable to pay the coupon on that date, but it would make its best efforts to pay within the customary 30-day grace period. The grace period would have ended on Monday, October 15.

Last week Monday, the influential Wall Street-based credit ratings agency, Standard & Poor’s Ratings Services (S&P), issued a statement in which they classified Grenada as having defaulted on its loan and lowered Grenada’s foreign currency sovereign credit ratings to ‘SD’ (selective default) from ‘B-/B’. In a statement, S&P said: “According to our criteria, we consider an obligation in default unless payment is made within five business days of the due date, regardless of any grace period.”

A statement from Government said that Grenada is a small country dealing with the effects of the challenges experienced by the global economy, including lower growth, lower tourism expenditure and lower foreign direct investment.

“Nonetheless, it continues to make every effort to meet its obligations. Furthermore, the Government of Grenada continues to implement an ambitious agenda of reforms, including improvement in the business and investment climate. Indeed, Grenada was recognised as one of the top ten reformers worldwide by the International Finance Corporation in its 2011 Ease of Doing Business Report,” said the statement.


In a release last week Tuesday in response to the S&P action, Grenada’s Ministry of Finance described the S&P action as premature. “Government considers the action by Standard & Poor’s as premature considering the terms of the agreement for the 2025 notes which provide a grace period of 30 days after the due date and the notice duly issued by Government to noteholders before the due date. This 30-day grace period has not yet expired,” said the Government statement.

In the meantime, a statement from the Ministry of Finance said that its most recent Treasury Bill Issue of EC$12.0 million of the Regional Government Securities Market (RGSM) has been oversubscribed by EC$0.4 million. The total bids amounted to EC$12.4 million at a final rate of 6 per cent. Grenada again approached the RGSM on October 17, 2012 with an EC$15.0 million 91-Day Treasury Bill Issue with a maximum bid price of 6 per cent.