JDX 97% Compliance among World’s Top Debt Swaps

Research conducted among countries that implemented a debt exchange in recent years, indicate that the Jamaica Debt Exchange (JDX), with a 97 per cent compliance to date, may well be among the most successful debt swap initiatives in the world.
The expert opinions of financial analysts and market watchers indicate that in January this year, the Government of the Republic of Seychelles, following a 89 per cent participation by holders of debts totalling US$283 million, declared that its debt exchange had received overwhelming support.
Uruguay, in 2004, achieved participation of 92.9 per cent of bondholders in its debt exchange programme and analysts, then, rated that performance as ‘very good’.
Following the initial expiration date for the acceptance of the JDX at 1 pm on January 26, 2010, Minister of Finance and the Public Service, the Hon Audley Shaw, on receiving the news that the Debt Management Unit of his Ministry had received submission forms from holders aggregating more than 90% of the bonds eligible for the transaction, declared that the success thus far was “a historic, game changing development.”
He also noted that the success was a critical component of Jamaica’s economic programme, and a prior action under the IMF Standby Arrangement that would clear the way for the full multilateral support package.
Earlier this week, Bank of Jamaica (BOJ) Governor, Brian Wynter, armed with the latest compliance data of 97 percent, hailed the JDX as being among the most successful debt swapping initiatives in the world.
The Governor made the comments at the Jamaica Exporters’ Association’s Quarterly Luncheon, at Eden Gardens in Kingston, on Wednesday, February 10.
“The exceptionally high participation rate in the exchange makes the Jamaica Debt Exchange one of the most successful debt exchanges in the world, and will result in significant savings to the Government and the Jamaican taxpayers,” he declared.
The JDX replaces 350 high priced Government of Jamaica (GOJ) domestic bonds with 24 new bonds priced at a lower interest rate- approximately 12.25 per cent- and longer maturities. The successful Exchange should save the Government some $40 billion in interest payments.
Mr. Wynter noted that Government interest payments, in particular, will fall sharply from 16.2 per cent of GDP in this fiscal year (ending March 31, 2010), to 9.7 per cent of GDP by fiscal year 2013/14.
Additionally, he said, the magnitude of maturing debt is expected to decline by 65 per cent over the next three years. The significant reduction in Government’s refinancing needs will ease the crowding-out effect of the Government debt, and the upward pressure that this would have placed on domestic rates.
Pamela McLaren, Senior Director, Debt Management Unit, Ministry of Finance and the Public Service, lauded the financial institutions which participated 100 per cent in the exchange, and the Jamaican public, for their “remarkable response” to the JDX.
She observed that Jamaica’s situation has been even more remarkable, because countries which have managed to get the level of participation that is close to the 97 per cent recorded by Jamaica, were in more dire situations and on the brink of default.
“That was not the case with Jamaica, so to have this level of participation is remarkable,” she observed.
In Jamaica’s case the performance of 97 percent compliance leaves room for an even more spectacular outcome, as the official action on the remainder of the bonds that have not been restructured remains to be seen, she said.
Ms. McLaren explained that, with the level of participation from the financial institutions and the support from the individual bondholders, it is likely that persons who have not taken up the exchange offer may be either still unaware of the issue, or living abroad. The exchange will be settled on February 16, 2010.