St. Kitts – Nevis Still Struggling With Internal Debt

National Debt

Moving Forward…But A Long Way To Go

Basseterre, St. Kitts – Nevis
March 13, 2012 (CUOPM)

A leading international economist is giving thumbs up to the debt restructuring programme being undertaken by the Government of St. Kitts and Nevis.

“It’s the right way to do a restructuring, unlike Greece,” said Gabriel Sterne, an economist with Exotix, a frontier market investment banking boutique specialising in illiquid bonds and loans, equities, structured finance, asset management and capital raising.

Sterne, a former Senior Manager at the Bank of England and a past economist at the International Monetary Fund (IMF) is quoted in a Reuters story by Carolyn Cohen, who works in London, as part of the Reuters investment strategy editorial team, specialising in emerging and frontier markets.

Cohen covers emerging bond, stock and FX markets as well as global market themes, and interviews emerging market policy-makers when they attend events in London.

“In the article headlined: “Like Greece, but Better,” Cohen, who started at Reuters in 1993, writing about foreign exchange, government bonds and Eurobonds before switching to emerging markets, wrote:

It’s a country with one of the highest debt to GDP ratios in the world, it recently launched a debt exchange to avoid a messy default and it is a member of a currency union. Sounds like Greece?

Oh, and its bond documentation already includes collective action clauses (CACs) to force the minority who don’t want to participate in the debt exchange to do so.  So it can’t be Greece, as Greece had to retroactively legislate for CACs.

In fact, this particular indebted nation is the tiny Caribbean country of St. Kitts & Nevis, which has launched a bond exchange tender that closes on Wednesday.

St. Kitts is a member of the Eastern Caribbean Currency Union, with a currency pegged at 2.7 to the U.S. dollar. But its total debts of EC$3 billion (US$1.1 billion) give it a debt to GDP ratio of 160 percent, much the same as Greece.

The country (population 50,000) is restructuring around $750 million of that debt through the bond exchange, which includes a partial guarantee from the Caribbean Development Bank (Caribbean version of EFSF support?)

But where most Greek debt was issued under Greek law, requiring the imposition of retro-CACs to push through the country’s bond swap last week and regarded as a default by ratings agencies “” triggering pay-outs on credit default swaps “” the St. Kitts debt is covered by St. Kitts law.

St. Kitts law is based on English law and this means that any debt issued within the last 20 years or so will automatically contain a CAC.

As Gabriel Sterne, economist at frontier markets brokerage Exotix says: “It’s the right way to do a restructuring, unlike Greece.”


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