Home' Trinidad and Tobago Guardian : April 20th 2017 Contents Barbados may be forced to pay
an interest rate of 11.42 per cent
on a syndicated loan of US$225
million arranged by Cred-
it Suisse Cayman Islands on
December 18, 2013, at its next
semi-annual interest payment on June 18, this
according to Business Guardian calculations.
Barbados took the controversial Credit Su-
isse loan to stave off having to seek an Interna-
tional Monetary Fund arrangement and after
the failure of a proposed 12-year bond of up to
US$250 million in October 2013, arranged by
Deutsche Bank acted and with CIBC coming
in as co-manager.
The loan was meant "to assist with budgetary
support including investment in infrastructure
projects and to build the foreign reserves" of
Barbados, according to the parliamentary res-
olution the Government of Barbados received
to access the loan.
The loan is for five years from the financial
close, which means it matures on December
The interest rate on the US$225 million loan
is US$ six-month Libor (determined five busi-
ness days prior to each payment date) plus the
applicable margin, according to the schedule
of the parliamentary resolution, which stated
that the applicable margin was expected to be
675 to 775 basis points (between 6.75 and 7.75
According to a Reuters report on December
10, 2013, eight days before the financial close,
"the loan offers a margin of Libor+700 basis."
With the US-dollar, six-month Libor at 1.42
per cent last week, Libor+700 basis points
would amount to 8.42 per cent.
But the syndicated loan also has a clause in
which the applicable margin increases by 50
basis points "in the event of a downgrade of
the Government's foreign currency debt by any
international or regional credit rating agency
below BB- (by Standards and Poor's or Fitch
ratings or below Ba3 (Moody's)."
Barbados was assigned a BB- credit rating
by Standard and Poor's on November 20, 2013
and Ba3 by Moody's on December 20,2013, ac-
cording to a table on the Trading Economics
Between December 2013 and March 9, 2017,
Moody's downgraded Barbados by six notches
from Ba3 to Caa3 and between November 2013
and March 3, 2017, Standard and Poor's took
Barbados down by four notches.
If the interest rate on the loan increases by 50
basis points for each downgrade, then Barbados
is likely to be now paying an applicable margin
of 10.0 per cent. That is 300 basis points (50
basis points times six downgrades) plus the
700 basis points that Reuters reported was the
original negotiated margin.
Interest payments are semi-annual, in ar-
rears commencing six months after the finan-
cial close, which means that Barbados pays
interest on June 18 and December 18.
In terms of the principal repayment, Barba-
dos is required to make eight equal semi-an-
nual amortisation's commencing 18 months
after the financial close, which means it was
required to make its first payment of principal
on June 18, 2015.
Eight equal semi-annual payments means
that Barbados is required to pay the holders
of the loan US$28.125 million (Bds$56.25 mil-
lion) in principal every six months between
June 2015 and December 2018, when the loan
However, in July 2015, responding to alle-
gations by Barbados Opposition Leader Mia
Mottley, the island's Finance Minister Chris
Sinckler told the Barbados Parliament in a min-
isterial statement on July 21, 2015: "On the 18 of
June 2015 under the terms and condition of the
loan contract with Credit Suisse, Government
in fulfilment of its obligations made the pay-
ment as scheduled in the amount of Bds$41.23
million, representing interest of Bds$20.6 mil-
lion and amortisation of Bds$20.63 million to
the various holders of the facility."
The statement by Sinckler, who called
Mottley's original comments "very reckless
and ill-considered," means that Barbados
would have paid the US dollar equivalent of
Bds$20.63 million in principal on June 18, when
it should have paid Bds$56.25 million---nearly
Assuming Finance Minister Sinckler accu-
rately reflected the facts in his parliamentary
statement, how could Barbados have paid in-
terest equivalent to 4.8 per cent and a fraction
of the required principal?
In a statement in response to Sinckler's, also
on July 21, 2015, Mottley questioned whether
the Barbados Minister of Finance had given
the country all of the facts.
By her calculation, the payment that was
due on the Credit Suisse syndicated loan was
approximately Bds$88 million (US$44 million),
which would have comprised interest payment
of Bds$31.75 million and a principal payment
of Bds$56.25 million.
Mottley said: "I further demand that the
minister of finance now explain to the coun-
try how a lesser payment of Bds$41.23 million
(US$20.615 million) now becomes acceptable
to the creditors.
"Neither the country nor the parliament has
been made aware of any subsequent renego-
tiation or change to the terms and conditions
of that loan.
"One would have thought if the fiscal cir-
cumstances and the state of the foreign reserves
of the country necessitated a renegotiation or
an extension of the terms of the repayment of
the loan, that this state of affairs would have
been brought to the attention of parliament
and the country.
"Iam further demanding
that the minister of fi-
nance come straight and
thorough with the citizens
of Barbados as to the true
status of the terms and
conditions of the Credit Suisse loan.
"Are all the terms and conditions still the
same as approved by parliament in 2013, or
have they, like most other things of late, been
changed unknown to the parliament and people
"If the loan has been renegotiated, or the
terms extended due to the inability of the gov-
ernment to readily meet them, then the minis-
ter of finance must say so and cease engaging
in verbal gymnastics and contortions.
"You cannot tell Barbadians that you are
going to change how you pay, pay less than
what you were required to pay, pay longer and
that is not a form of refinancing.
"Barbadians want to know why you paid less.
Is the loan longer than December 2018 and if it
is longer than December 2018 will Barbadians
incur millions of dollars in additional interest
for that extension?" Mottley added.
In comments a week before his ministerial
statement, Sinckler said:
"Miss Mottley further knows---or perhaps
doesn't---that any material alterations to the
official and original terms of any loan contract
between a sovereign country and its creditors to
the extent that introduces new payment terms
and conditions, constitutes a direct default or
technical default as so classified by interna-
tional capital markets and the international
"It is therefore absolutely impossible for any
Government of Barbados to surreptitiously al-
ter the original terms and conditions of any
loan, so as to permit it to break the original
terms and pay less on previously agreed terms,
and worse yet, to inveigle a major international
bank to accompany it in such mischief, as the
arranger of a major syndicated loan involving
varied investors," Sinckler said.
APRIL 20 • 2017 guardian.co.tt BUSINESS GUARDIAN
NEWS | BG7
over Bdos' US$225m
Credit Suisse loan
Barbados Finance Minister
Barbados Opposition Leader
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