SENATOR: GRENADA NOT IN DEFAULT

Information Minister, Senator Glen Noel, said last week Wednesday that the island does not have a problem with its payment to the Caribbean Development Bank (CDB), although there is credible information that the island is 180 days in arrears and that has contributed to the downgrading of the Bank’s long-term rating by the US-based rating agency, Standard & Poor’s (S&P).

Claiming that all of the five CDB-funded projects  on the island are on-stream, Noel said in a radio interview that when there is a problem it will affect the projects, but the Grenada projects are functioning normally.

“Generally, when you default you have a problem; we don’t have a problem, everything is flowing smoothly,” said Noel, who felt that critics of the Tillman Thomas administration are looking for ways to blame Grenada for the downgrade. “There are several countries that are attached to the CDB and they may very well be in default, it’s not Grenada,” he said.


S&P downgraded the long-term rating of the Barbados-based Caribbean Development Bank (CDB) to AA and warned that the ratings could plunge even lower if a regional government borrower fails to “clear its arrears” with the financial institution. S&P said that the decision to lower the ratings from AA+ to AA reflects “embedded credit risks in CDB’s loan portfolio”.

“Our view of the treatment of CDB as a preferred creditor by its borrowing member shareholders, which is established by practice, is a pivotal component of this analysis.

“We could lower our ratings on CDB if the government borrower, more than 180 days in arrears, does not clear its arrears with CDB; if other member governments fall more than 180 days past due, or if, contrary to our expectation, the Bank’s funding conditions or liquidity weaken.”

S&P has not named the offending government in arrears of more than 180 days, but informed sources have told the Caribbean Media Corporation (CMC) that Grenada is the country being referred to by the US-based rating agency.

“The ratings could stabilise at current levels if the public sector loan performance improves and if member capital contributions comply with scheduled payments,” S&P noted.

S&P said that following a review of the CDB, it lowered the long-term foreign currency issuer credit rating on CDB to AA from AA+ and also affirmed an A-1+ short-term foreign currency rating.

The CDB, established in 1969, comprises 26 member countries and contributes to the socio-economic growth of the region. The bank provides loans and guarantees principally to sovereign governments, public sector companies and to a small portfolio of private enterprises.

At the end of 2011, the Barbados-based devel-opment bank had one billion US dollars of development-related exposure.

But it said that the bank’s near-term funding and liquidity outlook has strengthened since the last review in May.

S&P said that to address its liquidity gap and US$226 million in funding needs for 2012, the bank issued a US$300 million bond in November that has improved its liquidity position and smoothed its near-term maturity schedule.

“CDB expects it will need up to US$30 million of funding in 2013 to support approximately US$100 million of disbursements. CDB’s liquidity now is sufficient to cover 12 months of debt service and scheduled loan disbursements, on par with peers.”

But S&P said the bank continues to face structural financing risks.

“As a small MLI (multi-lending institution), the issuance costs and size of its financing needs limit frequency of CDB’s international capital market issues, similar to other small MLIs, and make its debt maturity schedule uneven.”

It said it expects that CDB’s higher rated sovereign shareholders – Canada, Germany and the United Kingdom – to provide “extraordinary shareholder support in the form of callable capital in the event of a capital call”.