WALL STREET JOURNAL - Grenada has reached an agreement with its creditors to restructure $262 million of bonds that the small Caribbean island country defaulted on in 2013.
Bondholders have agreed in principle to a 50% haircut in the bonds’ original value, according to a government statement. In exchange, Grenada’s government will issue new bonds due in 2030 to existing bondholders, carrying an annual coupon of 7%. Grenada also agreed to share with the bondholders a portion of revenues that may be generated by its Citizenship by Investment Program.
The deal, which was announced on Thursday, ends a lengthy negotiation between the government and its creditors, which include Franklin Templeton and Acadian Asset Management.
Grenada’s defaulted 2025 bond traded Thursday at 26 cents on the dollar, a price that hasn’t changed for weeks.
Franklin Templeton and Acadian both declined to comment.
Despite its small size, the agreement is being closely watched by international investors, as Greece and Ukraine are striving to sort out their debt problems with creditors.
The agreement could provide a road map for other countries. “Grenada is just the first domino. There are other countries that are about to go through debt restructuring,” said Eric LeCompte, executive director of Jubilee USA Network, which helped negotiate the Grenada deal. In the Caribbean, Jamaica, Antigua and Barbuda, St. Lucia, St. Vincent and the Grenadines and Dominica have large debt loads, he said.
The deal is likely to provide the island with a significant reprieve. The relief represents 19% of Grenada’s gross domestic product, the statement said. But the country still has $907 million in public-sector debt.
Grenada’s default took place after hurricanes wreaked havoc on the island’s economy, whose tourism industry had already suffered from the global financial crisis.
The country’s economy is expected to grow by 1.2% in 2015, according to the International Monetary Fund, and its public debt projected to reach 110.2% of GDP.