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St Kitts and Nevis agrees to restructure debt

By Robin Wigglesworth in London

Saint Kitts and Nevis, the Caribbean island federation, is poised to restructure its sovereign debt burden, one of the highest in the world relative to its economy and 50,000 inhabitants.

The West Indies country has seen its indebtedness skyrocket owing to the costs of reconstruction after periodic tropical hurricanes, a drop in tourism and the cost of unwinding its struggling sugar industry since the 1990s.

The federation’s cabinet approved the final dissolution of the St Kitts Sugar Manufacturing Corporation this month, seven years after the official closure of the sugar industry. The country’s football team are still informally known as the “Sugar Boys”.

International creditors last week overwhelmingly accepted a debt exchange package on $150m of St Kitts’ $1.1bn overall debts, which will see them take deep haircuts. The small sliver of holdouts will be coerced into acceptance by collective action clauses similar to those used by Greece.

“As a creditor you’re never really happy at the end of something like this but it’s a balanced, sustainable outcome,” said Michael Gerrard, managing director of BroadSpan Capital, a boutique investment bank that advised the creditors.

Local banks, which hold about $600m of government debts, will take over government assets that have secured the loans. The balance of St Kitts’ total $1bn debts are in treasury bills and multilateral loans from organisations such as the Caribbean Development Bank, and will not be restructured.

When the restructuring and debt exchange is completed in mid-April, the country will see its debt-to-gross domestic product fall from about 149 per cent to about 95 per cent, according to White Oak Advisory, St Kitts’ financial adviser. When the restructuring was first announced last summer, the ratio was close to 200 per cent.

“This is indeed a historic day for St Kitts and Nevis,” Denzil Douglas, the prime minister and minister of finance said late last week.

The International Monetary Fund, which signed an $80m stand-by agreement with St Kitts last year, has said that the country’s economic prospects were showing signs of improving after two years of contracting, and that the government was hitting its fiscal targets.

Like Greece, St Kitts is part of a wider monetary bloc, the East Caribbean Currency Union, which has stymied its efforts to tackle its debt burden. Along with St Kitts, the union includes Antigua and Barbuda, Dominica, Grenada, St Lucia and St Vincent and the Grenadines.

“The outcome is also good news for a region which is known to be among the most highly indebted in the world,” Sebastian Espinosa, managing director of White Oak, told the Financial Times. “It confirms that even the highest of debt burdens can be resolved in an orderly manner.”

 

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A Moment with the Registrar of Lands

By Robin Wigglesworth in London

Saint Kitts and Nevis, the Caribbean island federation, is poised to restructure its sovereign debt burden, one of the highest in the world relative to its economy and 50,000 inhabitants.

The West Indies country has seen its indebtedness skyrocket owing to the costs of reconstruction after periodic tropical hurricanes, a drop in tourism and the cost of unwinding its struggling sugar industry since the 1990s.

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The federation’s cabinet approved the final dissolution of the St Kitts Sugar Manufacturing Corporation this month, seven years after the official closure of the sugar industry. The country’s football team are still informally known as the “Sugar Boys”.

International creditors last week overwhelmingly accepted a debt exchange package on $150m of St Kitts’ $1.1bn overall debts, which will see them take deep haircuts. The small sliver of holdouts will be coerced into acceptance by collective action clauses similar to those used by Greece.

“As a creditor you’re never really happy at the end of something like this but it’s a balanced, sustainable outcome,” said Michael Gerrard, managing director of BroadSpan Capital, a boutique investment bank that advised the creditors.

Local banks, which hold about $600m of government debts, will take over government assets that have secured the loans. The balance of St Kitts’ total $1bn debts are in treasury bills and multilateral loans from organisations such as the Caribbean Development Bank, and will not be restructured.

When the restructuring and debt exchange is completed in mid-April, the country will see its debt-to-gross domestic product fall from about 149 per cent to about 95 per cent, according to White Oak Advisory, St Kitts’ financial adviser. When the restructuring was first announced last summer, the ratio was close to 200 per cent.

“This is indeed a historic day for St Kitts and Nevis,” Denzil Douglas, the prime minister and minister of finance said late last week.

The International Monetary Fund, which signed an $80m stand-by agreement with St Kitts last year, has said that the country’s economic prospects were showing signs of improving after two years of contracting, and that the government was hitting its fiscal targets.

Like Greece, St Kitts is part of a wider monetary bloc, the East Caribbean Currency Union, which has stymied its efforts to tackle its debt burden. Along with St Kitts, the union includes Antigua and Barbuda, Dominica, Grenada, St Lucia and St Vincent and the Grenadines.

“The outcome is also good news for a region which is known to be among the most highly indebted in the world,” Sebastian Espinosa, managing director of White Oak, told the Financial Times. “It confirms that even the highest of debt burdens can be resolved in an orderly manner.”