Jamaica's successful US $743m tap of existing bonds Thursday funded a liability management exercise that substantially pushed out the average maturity of the sovereign's debt and reduced interest payments, said bankers.
The reopening of existing 8% 2039s, which priced on Thursday at a cash price of 114.082 and a yield of 6.75%, funds a bond buyback that was announced this week.
The Caribbean nation, rated Caa2/B/B, has agreed to buy back around US $785m in principal of its 10.625% 2017s and 8% 2019s, according to results of a tender offer announced on Friday. The cash price of the reopened bonds is well above the prices paid to buy back the 2017s and 2019s - 108.00 and 110.50 respectively. This would lead to an estimated US $42m reduction in the total debt stock of the sovereign, a source close to the deal said.
"It is quite prudent of the government to take advantage of global interest rates to take out (expensive) debt," said Sean Newman, a senior portfolio manager at Invesco.
"They have been able to stick to their primary surplus target and they certainly can be commended for fiscal prudence in managing public sector accounts and getting debt to GDP on downward trajectory." Of the US $743m reopening, some US $364m came from new investors, while the remaining came from holders of the 2017s and 2019s switching into the longer maturity, the source said.