ST. GEORGE’S, Grenada, CMC – The Grenada government will defer more than US$$17 million in total payments to government bondholders because of the devastation caused to the island following the passage of Hurricane Beryl on July 1, leaving damage estimated at US$30 million.
The Dickon Mitchell administration has yet to make an official statement regarding the payment to bondholders. Still, the government’s press secretary, Neila Ettienne, confirmed in a WhatsApp message that the government had triggered the hurricane clause in the bond.
International media houses reported that Grenada became the first country in the world to use a so-called hurricane clause in a government bond. This special feature allows authorities to postpone debt payments in the wake of a major natural disaster.
In a notice to the holders of one of its international bonds, the Ministry of Finance said it had “elected to make a deferral claim as a result of the event,” adding the “modeled loss” to the economy from Beryl was greater than US$15 million.
“Grenada will not make the bond’s next scheduled payments due on November 12 and May 12 next year, which add up to just over $12.5 million combined. Instead, the money will be added to the US$112 million bond’s subsequent lump sum “principal” payments until the end of its term in 2030,” said the notice.
Grenada has elected to make a deferral claim due to the event. As the modelled loss is greater than US$15 million, the deferral dates include each of the next two consecutive payment dates, explains the letter in which the London-based independent financial advisory firm White Oak Advisory acted as the financial advisor and the international law firm Cleary Gottlieb Steen & Hamilton LLP acted as the legal advisor to the Grenada government.
Grenada included the hurricane clause in 2015 after a previous hurricane led to two debt restructurings in a decade.
Over the period December 2014 to November 2015, debts amounting to US$318 million, or one-third of Grenada’s total public debt, were restructured with three creditors: the Export-Import Bank (the Eximbank) of the Republic of China (Taiwan), holders of Grenada’s previously restructured 2025 sovereign bond, and Grenada’s Paris Club creditors Hurricane clauses were negotiated in all three agreements.
Their provisions differed markedly, with the Eximbank’s deal most closely aligned to Grenada’s request. The 2025 bondholders offered a less flexible version of Eximbank’s hurricane clause, while the Paris Club provision differed considerably.
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