Shaw Says Gov’t will Reclaim Non-JDX Bonds

The Minister of Finance and the Public Service, Hon. Audley Shaw, says the Ministry will be moving to reclaim bonds currently being held by investors who have declined to participate in the Government’s Jamaica Debt Exchange (JDX) programme.
The debt management initiative involved voluntary exchange of existing bonds, excluding Treasury Bills, issued by the by the Government in the domestic market, for new bonds of the same principal value, but which have lower interest cost and longer maturities. The exchange ratio saw each $100 of old bonds being exchanged for new $100 bonds.
The medium term initiative, launched in January, was pivotal in Jamaica securing up to US $2.4 billion in low cost financing from the International Monetary Fund (IMF) and other multilateral institutions.
Speaking at a media briefing at the Ministry, National Heroes’ Circle, Kingston, on Wednesday (March 3), Mr. Shaw advised that JDX participation rate had exceeded 99.2 per cent.
“Jamaicans and our creditors have demonstrated that they understand the nature of our problems, and. have set about being part of the solution,” he declared.
Noting that there was a 100 per cent response from institutional bond holders, Mr. Shaw pointed out that the outstanding investors were principally individual bond holders and that there is mechanism being pursued in dealing with those.
“The Debt Management Unit is handling it. In fact there are still some (investors) who are still coming in, and we are accommodating them,” he informed.
Mr. Shaw, however, pointed out that in a bid to “tidy up” the operations of the JDX, and to ensure that all instruments were averaging similar interest rates, the Ministry would be moving to reclaim the remaining bonds and reimburse those investors’ funds.
He said that the Ministry will commence advertisements to this effect as of Thursday (March 4).
“We are going to exercise the legal option that we have to formally (recall) those high interest rate instruments, pay them out, get rid of them, so that everything is at one, averaging low interest rates. Let’s not forget, I am headed for low interest rates, that is where I’m going because that’s where the rest of the world is,” Mr. Shaw stressed.
Executive Vice President of the Inter-American Development Bank (IDB), Daniel Zelikow, has said that he is impressed with the near 100 per cent response to and participation in the (JDX).
Speaking at a media briefing, Mr. Zelikow said he was happy to hear that the debt swap was extraordinarily successful in a number of ways.
“First, it makes possible the saving of some $40 billion in. 2010 in debt service costs that would have otherwise have had to be paid. That’s $40 billion that is freed up for other uses. Second, it pushed out maturities, so that the debt service burden that the Jamaican Government will face over the next three years is only one-quarter to one-third of what it, otherwise, would have been, had there not been a debt exchange,” he demonstrated.
He said that it also did much to improve the functioning of the debt market, as some 250 instruments were consolidated into just 24, which makes for greater liquidity, better pricing and greater simplicity for administration and settlement of the debt instruments.
Mr. Zelikow said, however, that he was most impressed by the response from bond holders, citing that it was probably the highest participation rate that has ever occurred in a sovereign debt exchange.
He said that participation of that scale signifies that investors came to realize that their long term interests are best served by helping the Jamaican Government through this problem.
“The behaviour of the Jamaica investing public was, in some ways, true to form of what one hears about Jamaica, that when times are bad, Jamaicans pull together,” he stated.