Jamaica Welcomed back to Bond Market

Bolstered by an order book of over $4bn, Jamaica staged a successful return to the market after a three-year hiatus on Tuesday, tightening the price of its $800m 10-year soft-bullet bond to 7.625%.

Citi was the global coordinator on the deal and joint bookrunner with BNP Paribas. The SEC registered bond was priced at par and has a final maturity in 2025, but will amortize in equal installments in 2023, 2024 and 2025.
It was described as Jamaica’s largest transaction ever and the country’s lowest coupon in the international market. The yield came below initial price thoughts of low 8% issued a day earlier.

“It’s kind of a triumph for them, they got a welcome response from a market that was very skeptical a year ago,” said a New York-based banker. “They have done their homework and they were prepared to do what needed to be done. The market responded pretty remarkably to that.”

International investors, mainly from the US and Europe, dominated the book and very little allocation went to LatAm accounts, sources said. The new bond followed a non-deal roadshow in the US and Europe last month.
Caa3/B-/B- rated Jamaica is one of the most heavily indebted countries in the world and has gone through two restructurings in the past five years, the last one in February 2013. Since then, it has benefitted from an IMF program that aims to lower the country’s public debt and bolster economic growth. At end-March 2014, total public debt stood at 131.9% of GDP compared down from 135.6% a year earlier.

“I think the credit is weak, it even has a Caa1 rating, but interest will be high and it will probably perform well … The problem is that there’s not enough paper out there and if they pay around 8% the investors will go for it, especially because it will feature in the index,” said an investor before the deal priced.

Jamaica’s foreign currency bonds are very illiquid as investors tend to take long positions on the paper. Jamaica’s 2025 was heard to be trading at 7.25% on Tuesday morning, which would imply a small new issue concession.

Jamaica’s return to the bond market follows Ecuador’s come back last month, six years after the Andean nation defaulted on $3.2bn of debt. Ecuador priced its $2bn 10-year bond at 7.95%.

“This is an environment where people are looking for yield and these types of credits that don’t come to the market often can actually do something – whether it’s Ecuador, Jamaica, even Kenya for that matter. They can get relatively attractive yields from a historical perspective, so it makes sense for these guys to issue,” said another investor.

“The diversification aspect of these credits enables them to get something done because they don’t come to the market often,” he added.

Jamaica will use some of the proceeds to repay its 10.5% €150m 2014 bond, and the remainder for general government purposes, including debt refinancing.