Maturity: August 15, 2012
Issue price: 99.05
Launched: Thursday August 15
Sole mgr: Bear Stearns
We were mandated for two deals in the region - Grenada and Belize - around the same time, in late April/earlyMay. We had a sense fairly early on that a negative outlook from the rating agencies for Belize was likely - and we saw both agencies put Belize on negative outlook in the last few weeks - so we decided to go with the Grenada deal first.
The goal of the Belize issue was a complete refinancing of short term debt obligations and no new cash. Belize has some short term debt coming due in the next few years and wanted to roll it up in a longer term bond.
After this deal 70% of its external debt will have an average life of 10 years, so Belize is no longer under any short term refinancing pressure.
Belize was put on negative outlook because of extra government spending to rebuild storm-damaged areas. Doing this deal will reduce the government's vulnerability to market shocks at a time when it wants to expedite its rebuilding efforts.
Belize was priced to yield 9.65%. Grenada was priced at 9.5% in June when the market was significantly better than it is now. At the time of pricing the Belize issue, Grenada was trading at a yield of about 9.25% and Jamaica at around 9.75%, so we positioned the Belize transaction to come between the two.
Belize was issued wider than where Grenada was priced, even though they are both rated BB-, because market conditions are much more difficult now than they were in June and because of the fact that both rating agencies have Belize on negative outlook.
We were able to execute a successful deal because we could show that the liability profile of the country would be very strong following the transaction.
The book was not quite two times oversubscribed, at $200m. Almost a third of the Grenada issue was sold into Europe, but we did not see as much European interest on this deal, which is a function of the fact that this week half of Europe is on holiday. The issue was mostly driven by US investors.
"...we continue to see this type of off-the-run credit enjoying diversification demand. Firstly, you have local demand for these deals out of the Caribbean area and you also have some international fund managers that use these credits to bring diversification into their emerging market portfolios. The deal came with some new issue concession but, given the state of the markets and the time of the year, that's to be expected."