Suriname reached an agreement in principle with a key group of bond investors to restructure $675 million of defaulted global debt, debuting an oil-linked recovery tool to cap more than three years of negotiations.
(Bloomberg) — Suriname reached an agreement in principle with a key group of bond investors to restructure $675 million of defaulted global debt, debuting an oil-linked recovery tool to cap more than three years of negotiations.
Under the agreement, investors holding debt from South America’s smallest nation will accept losses of 25% on their holdings, according to a government statement on Wednesday. In exchange, they’ll get new dollar bonds and a special security that pays out if oil discoveries off the coast make the government cash-rich.
After a trio of Covid-era defaults and years of debate between creditors and officials, it’s a major moment for Suriname. It paves the way for the former Dutch colony to regain access to crucial financing — and potentially restart a $688 million lending arrangement with the International Monetary Fund.
A creditors group, which control about 75% of the nation’s debt, said in a statement the proposed agreement will give the government access to cash needed to support an economic recovery.
Earlier: Suriname Nears Key Restructuring Deal After Years in Default
The deal, which will be implemented through an exchange offer and consent solicitation process, is conditioned on Suriname reaching an agreement with the IMF by June 15. The existing IMF deal stalled-out last year when the multilateral lender’s staff was unable to complete economic reviews.
Suriname’s defaulted notes due in 2026 have been quoted at around 64 cents on the dollar, while the bonds due later this year are worth about 72 cents, according to indicative pricing compiled by Bloomberg.
The Deal
As part of the restructuring, Suriname will issue $650 billion of new, 10-year notes with a 7.95% interest rate. In 2024 and 2025, interest will be paid in cash at a 4.95% rate, according to the government’s statement.
The agreement also grants investors access to additional payouts if the future brings the country a flurry of oil revenue from an offshore basin that driller Apache Corp. says is “the most watched” on the globe.
A so-called value recovery instrument would kick in after the government receives the first $100 million of oil royalties through the commercial development of an offshore reserve known as Block 58. After that revenue threshold is reached, the government would allocate 30% of annual royalties to make payments on the instrument.
The creditor group said the instrument is structured to ensure the government will benefit from a majority of future oil production proceeds, while providing bondholders timely repayment.
Members of the creditor committee include Franklin Templeton Investment Management Ltd., Eaton Vance Management, Grantham, Mayo, Van Otterloo & Co., Greylock Capital Management and T. Rowe Price.
–With assistance from Esteban Duarte.
(Adds creditor statement in fourth paragraph, details on restructuring throughout.)
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