What is Barbadians NOT Being Told about the External Debt Restructuring Agreement?

The following was posted as a comment to the Central Bank of Barbados Review of the Economy: January to September 2019 blog by Walter Blackman, Actuary and son of the soil in reply to the following by the blogmaster:

@John A, Walter, Northern Observer et al, You guys read this document?”

So far, we have been provided information on the external debt restructuring exercise from three sources:

First, the press release from the Ministry of Finance, Economic Affairs & Investment mentioned 5 bonds:

7.8% bond, maturing in 2019
Floating rate loan maturing in 2019
7.25% Note maturing in 2021
7.00% Note maturing in 2022
6.625% Note maturing in 2035
The following points should be noted:
Maturity date given is 2029.
New interest rate is 6.500%.
No Face Values are given.
No specific mention is made of the Credit Suisse loan.

Second, an article from Barbados Today, dated October 24, 2019, lists the following 4 loans:

150M due 2021
220 M due 2022
119M due 2035
225M Credit Suisse Loan

The following points should be noted:

No Maturity dates are given.
No “old” or renegotiated interest rates are given.
We are given Face Values of the loans for the first time.
Specific mention is made of the Credit Suisse loan for the first time, but we are only told the Face Value is 225M.

Third, another Press Release made by the Ministry of Finance, Economic Affairs & Investment (you provided a link above) dated November 5, 2019 lists the same 4 loans mentioned by Barbados Today on October 24, 2019:
150M @ 7.25% due 2021 (Face Value Agrees with Barbados Today)
200M @ 7.00% due 2022 (Barbados Today said 220M)
190M @ 6.625% due 2035 (Barbados Today said 119M)
225M Credit Suisse Loan

The following points should be noted:

Excluding the Credit Suisse Loan, the total Face Value of the other 3 loans amount to 540M. Is this the “renegotiated” value? if so, what were the original face values that existed before the restructuring?

If these are the original Face Values, what are the new negotiated values?
What was the total value of the external debt payments that the Government of Barbados refused to pay after May 2018?

How was the Credit Suisse Loan repackaged?

Conclusively, I do not believe that press releases from the Ministry of Finance, and articles from the media have given members of the public enough information to determine the amount of savings that accrued to Barbados from the external debt restructuring exercise.

Does White Oak Have a Plan B?

The Mia Mottley government forced a debt restructure on locals holding bonds. The government boasted about the speed it was completed although truth be told it was a Hobson’s choice.

On the other side of the debt restructuring transactions the external bond holders have so far been nettlesome at the negotiating table. Approaching 18 months and there appears to be a stalemate in the negotiation. The Mia Mottley government has been unable to deliver on a promise that the debt restructure transaction would have been closed by now.

Senior members of the BU family have taken umbrage to a recent comment by one of the government’s financial advisors Avinash Persaud.  Here is a pertinent quote.

What we have been trying to do is to get the best deal possible for Barbados, which means that it can’t be the quickest deal possible. If you play poker do you fold early? If you don’t need to borrow for four years you have a good hand. So, we are following the right strategy – No backing down

The blogmaster must agree at the idiocy of the statement when viewed through the eyes of a good poker player.  A good poker player will fold based on the game situation. It does not have one Rh to do with early or late in the game.

The blogmaster appreciates there is an element of table craft that will be exercised by actors sitting around a negotiating table. One must however critique the judgement of Persaud to feel embolden to have issued such a statement at this juncture in the negotiation.

Despite a bevy of officials recruited by the government with job descriptions to cover finance, communications, public relations and media liaison –  the public is left to speculate as to the current state of negotiations with the external debt restructure transaction.

Given the perilous state of the Barbados economy and the time it is taking to close the debt restructure deal with external creditors – the more aware citizens excluding the yard fowl variety – have started to examine the increasing downside risks threatening the Barbados recovery program. The blogmaster counts himself among those who is now very concerned that the high price White Oaks team has been unable to resolve the wedge issues.

It is time to go to plan B.

Do we have a plan B?


Barbados Pushing Back on External Creditors

Some have been following the intense negotiations in motion between the government of Barbados and external bondholders. Whether one agrees with the decision of the Mottley government to trigger SD, the bottomline is that this is where we find ourselves and ALL Barbadians must support the effort of the government through its agent White Oaks to close the best deal for the country.

Barbados is not the first country to trigger SD and will not be the last, let us get over it. Debt restructure comes in all shapes and sizes, if we breath some life into the economy the opportunity to improve credit ratings will come.

It is unfortunate some members of the political class prefer to nitpick instead of rallying around the flag at this juncture. The decision was made, move on!

White Oak is being paid very well to negotiate the best deal for Barbados. They have done similar deals for other countries and the principals are known to those sitting across the table. That some will want Barbados to cave to the creditors because we are the defaulter and therefore should accept terms offered by the lender is nonsense.

However this blogmaster agrees there is a need to demystify the matter for the average Barbadian to  assist with informing a national debate on the ramifications of a protracted negotiation.

Here is another article planted in the international press by the other side to pressure the government of Barbados.

-David, Barbados underground

Creditors prepare to push back on Barbados debt proposal

By Miluska Berrospi

NEW YORK, June 12 (IFR) – Investors are preparing to push back on a restructuring proposal released this week by the government of Barbados, sources told IFR on Wednesday.

After months of discussions with creditors, the government, which suspended debt payments last year, laid out on Tuesday two options for holders of its 7.25% 2021s, 7% 2022s and 6.625% 2035s.

But creditors, which had feared the government would launch an exchange without their consent, said such terms were unsatisfactory.

“We hope that before they actually launch an offer, the government will re-approach us and try to reengage in conversations,” said an investor involved in the process.

“If they launch something we’re prepared to reject it and wait,” he added.

The creditor committee comprising both dollar bond and loan holders are preparing a response for later this week, sources said.

“The government of Barbados has improved the proposed terms as much as it possibly can given its commitment under the IMF-support program,” the Barbados government said in a statement on Tuesday.

In October 2018, the International Monetary Fund (IMF)approved a US$290m bailout for the Caribbean nation.

“We are disappointed that they’re taking the tone that they are. We think it’s damaging to the country and to foreign investment,” added the investor.

Creditors would have about three weeks to respond were the government to launch a formal exchange offer on the options presented.

No payments have been made on outstanding debt since Prime Minister Mia Mottley took office in May of last year.

The country restructured around Bds$12bn (US$6bn) of domestic last October.



The Grenville Phillips Column – Slapping and Patting

The public justification for using White Oak, was that the BLP thought that no Barbadian financial consultant was sufficiently competent to negotiate with our external creditors. That was a shockingly unfair criticism of Barbadian financial services professionals. Having read the White Oak contract, the list of services should be within the competence of any accounting firm experienced in liquidation or judicial management.

The BLP administration has now confirmed that White Oak also advised on the local debt. Surely advising on our local debts is well within the competence of our local consultants. If the Government thought that our local consultants lacked some experience, then they should have allowed them to participate in a joint-venture contractual arrangement. However, even that was not allowed.

After the Government disqualified all Barbadian accountants and economists, by publicly questioning their competence, why was there no objection by the Institute of Chartered Accountant of Barbados (ICAB), or the Barbados Economics Society (BES)?

Actually, there was a response. However, instead of defending the reputations of their members, the BES gave a fawning assessment of the BLP’s first year. Why are these professional associations assuming that defaulting on our debt was our only option, when it was not?

Why are they not educating the public on the clear difference between debt restructuring and debt default? No one is objecting to debt restructuring. But for a country to default, when there is money available to pay creditors, is recklessly irresponsible and carelessly damaging to a country’s financial reputation. Why are our local financial professionals unwilling to provide an honest analysis of the current administration’s options?

To find the answers to these types of questions, we need to be reminded of Solutions Barbados’ unique experience. With the economic ruin of Barbados foreseen, Solutions Barbados designed an economic recovery and growth plan that provided approximately $1B in surplus during the first year, without increasing taxes, laying off persons, or requiring external funding.

It was to be done by facilitating the international competitiveness of Barbados. The method included: removing the excessive wastage and inefficiency costs of public services by properly managing them; eliminating the corruption costs; depoliticising the public service by promoting public workers on merit alone; and reducing taxes. Using the actual government expenditures and revenues, the plan gave the predicted surplus. It was also independently favourably reviewed by a Chartered Accountant.

We appealed to the national associations of accountants, economists, bankers, and commerce to honestly evaluate our economic growth plan, and inform the public of their findings, but they would not. The BLP then publicly stated that they would never share their economic plans with any of them, and they cowered, and then renewed their determination not to review ours.

When journalists become politically compromised, then political leaders know that they can say and do anything, and always be guaranteed fawning coverage. When the media fails in this manner, professional associations must assume the role of educating the public. When profession associations become politicised, then the public is left defenceless against the political wolves.

Professionals who mislead the public with politically biased advice, sell their professional integrity cheaply. They may be repaid with invitations to parties for some free food. Those who tell some woppers for their party may get appointed to a board or the Senate, but that is the most that they can ever hope for.

Political leaders know that politically compromised professionals who shield them from scrutiny, can never be trusted to give honest professional advice – ever. They certainly cannot be trusted anywhere near any important contracts where unbiased advice is critical. Tragically, after selling their integrity, those professionals cannot even qualify for a single ordinary crumb from White Oak’s table.

The current administration seems assured that they can publicly question the professional competence of Barbadian consultants, and be assured of their absolute loyalty. Our financial consultants seem to possess a rare internal fortitude that allows them to be publicly slapped about with contempt, and then respond by pitiably grovelling for an affirming pat on the head from their slappers.

Grenville Phillips II is a Chartered Structural Engineer and President of Solutions Barbados. He can be reached at NextParty246@gmail.com

White Oak and External Creditors: Flirting with Hobson’s Choice


The blogmaster read the following article over night while perusing the financial newsfeed.

Patriotic Barbadians that understand these matters are obviously concerned negotiations have stalled with external creditors. We have to go with communications being dropped in the public space.

Commonsense support that it is not unusual creditors will push back against having to take a haircut. Barbadians wish the White Oak negotiating team well, as a country we have a lot riding on the best outcome.

Both sides agree the country of 300,000 people needs to cut debt levels. Yet talks have soured in recent weeks over how much of the burden should be borne by creditors in the form of deep haircuts or other terms. For its part, the government said it isn’t willing to negotiate targets established when it took a bailout from the International Monetary Fund last year – extracted from the Bloomberg report

Both sides seem to agree a restructure of the debt is necessary given the high debt burden and current state of the economy. What is at dispute is the amount creditors are being asked to leave on the table. Creditors have to protect their interest and the government having opted to SD will have to make it count given the damage to country’s credit rating and how it will be perceived by lenders.

However the foreign creditors will know that they have an overlapping interest with the government of Barbados. If the economy that is precariously perched on the economic cliff continues were to tank all that will be left is Hobson’s choice.

Time to close the deal!

Barbados Clashes With Creditors in Talks to Cut Greece-Like Debt


Barbados’ prime minister is butting heads with creditors over how to cut one of the world’s largest sovereign debt loads, creating a sticking point in the year-long negotiations to restructure the Caribbean nation’s defaulted dollar bonds.

Talks with foreign creditors have dragged on since last June, when Prime Minister Mia Mottley said she would restructure the island’s “unsustainably high” debt burden. While both sides said they are open to continued negotiation, they appear far from consensus.

A committee of creditors, who hold 55% of outstanding dollar debt, said Wednesday that they plan to unanimously reject a government proposal to exchange defaulted bonds for new debt unless the two sides negotiate together.

“The committee strongly believes that the launch of a unilateral exchange offer by the government of Barbados without the support of the committee will be highly detrimental to the country’s economic stability,” they said in a statement.

Both sides agree the country of 300,000 people needs to cut debt levels. Yet talks have soured in recent weeks over how much of the burden should be borne by creditors in the form of deep haircuts or other terms. For its part, the government said it isn’t willing to negotiate targets established when it took a bailout from the International Monetary Fund last year.

No Compromise

At that time, the government estimated debt had ballooned to about 175% of gross domestic product, meaning it owed around $9 billion. That would have made it one of the world’s most-indebted countries, trailing only a handful of others, including Greece, according to IMF figures. Mottley said she “will not compromise” on the goal of bringing that ratio down to 60% by 2033.

“We leave it to creditors to decide whether this is achieved through a par deal with long tenors and low interest rates, or face value haircuts with shorter tenors and higher interest rates. But the targets must be met in full,” she said in a written response to questions.

Mottley inherited a troubled $5 billion economy when she took office last May. The island known for its white sand beaches had been struggling for years amid competition from less-pricey Caribbean tourism destinations, crumbling infrastructure, and a currency that’s pegged to the U.S. dollar. She quickly struck a $290 million deal with the IMF and restructured about $6 billion in local currency debt.

The government owes around $700 million in dollar bonds, plus bank loans and other foreign debts, according to a spreadsheet posted to a website for creditors in January. Bonds maturing in 2035 have rarely traded in recent months, according to data compiled by Bloomberg.

The creditors committee said it put forth an offer two weeks ago “based on terms that aim to support the government’s debt and reform objectives while creating restructured instruments with broad market acceptance.” The committee said it is made up of long-term investors, regional central banks, individual bondholders and financial institutions and represented by advisers Newstate Partners and Washington-based law firm Arnold & Porter Kaye Scholer LLP.

The creditors contend that their offer would have allowed the government to reach its debt target a year later than it wants, according to people familiar with the committee’s negotiations. The committee’s position is that the government’s estimates fail to take into account certain revenue variables and that it is trying force severe restructuring terms on creditors to meet its debt targets, said the people, who were not authorized to discuss the negotiations.

White Oak Advisory, which is representing the government in negotiations, said the creditors’ offer “fails to meet IMF test for debt sustainability, and by quite some margin,” according to an email statement. “It is disappointing that Barbados continues to be faced with this kind of position after almost a year of negotiations.”


Another Grenville Phillips Column – White Oak

fscwhiteoakThe Government has allowed an unusual amount of transparency with the White Oak contract. The recent (12 May 2019) Financial Times article reported that White Oak would receive an “absurd” fee of US$27M. I assumed that they meant US$2.7M since the calculations were done by Financial Times’ staff, and the error could have been missed by the editors.

Avinash Persaud responded to the Financial Times article, but surprisingly, he did not challenge the reported fee. Rather, he claimed that Barbados got value for money. Then Clyde Mascoll provided a similar endorsement, with the shocking claim that no Barbadian could have done the job. Their uncritical and fawning endorsements of White Oak should demand an unbiased examination of this no-bid contract.

In their contract, White Oak specifically state that they are not providing any accounting or legal services. They are mainly giving advice, for which they are to be paid a monthly retainer fee of US$85,000. They also get a success fee of 0.45% on foreign debts that they can get cancelled or amended, and 0.40% on any local debt that they can get cancelled or amended.

The total Barbados debt was approximately BD$15B, with about $12B in local currency and $3B in foreign currency. The BERT restructuring of the local currency debt resulted in a BD$2B reduction of our debt. We were told that White Oak were working on the foreign currency debt.

If White Oak can save Barbados from paying 25% of the foreign currency debt after one year of negotiations, then they stand to earn a success fee of approximately US$1.7M plus a retainer of US$1M. This total fee of US$2.7M led to my assumption that the decimal point was mistakenly omitted from the Financial Times’ article.

The only way that White Oak can earn anywhere near the reported US$27M, is if their success fee rate is applied to the total local currency debt, instead of just the amount that they can successfully negotiate to avoid us paying. Clearly that could not be the intent, since success fees are normally applied to the amount that the consultant can save the client from paying.

If White Oak’s success fee rate is misinterpreted to be applied to the total debt, then White Oak can ludicrously get creditors of Barbados’ $15B debt to agree to a one-month delay of payment. For that lunatic advice, White Oak can legally earn US$30M, and we would still have to pay the entire $15B of debt. No political administration could be foolish enough to sign such an unfair contract.

The retainer is also badly arranged, since White Oak can simply make US$1M each year by doing absolutely nothing. After approximately one year, they still have not completed renegotiating our foreign currency debt, which is what they were reportedly contracted to do.

This confusion could have been avoided if the Contractor General, who should be able to identify weaknesses in contracts before the Government signs them, had been appointed. The BLP promised to address political corruption by appointing such a person, but has yet to do so.

The listed services that White Oak are contracted to provide, should be well within the competence of any accounting firm in Barbados experienced in liquidation or judicial management. If such local accounting firms agree with Clyde Mascoll’s assessment of their competence, then they should be ashamed of themselves for their incompetence, cowardice, or both.

Grenville Phillips II is a Chartered Structural Engineer and President of Solutions Barbados. He can be reached at NextParty246@gmail.com

Two Man White Oak Making 27 Million from Restructuring Deal

The following article was posted to the Financial Times and will be of interest to the BU family. Discuss for 10 marks.


-David, blogmaster



Barbados creditors fume at ‘absurd’ $27m advisory fees


“London-based boutique, White Oak, in line for payout for work on $7bn restructuring

“White Oak’s engagement letter was signed five days after Mia Mottley was sworn in as prime minister last year…”

May 9, 2019 8:30 pm by Colby Smith in New York

A little-known UK advisory firm stands to make about $27m from the restructuring of Barbados’s $7bn of debts — close to what Lazard earned seven years ago when it advised Greece on defaulted debt nearly 40 times bigger.

White Oak Advisory is a small firm with just two partners located opposite Claridge’s hotel in London’s Mayfair. The size of the fee it will receive from its work on the default has outraged the Caribbean island’s creditors.

“The fee is absurd given the size of the debt,” said Sean Newman, an Atlanta-based portfolio manager at Invesco and a member of the external committee of creditors. “I’ve never seen anything like this in my 20 years in the business.”

White Oak was founded a decade ago by Sebastian Espinosa, a former Houlihan Lokey banker, and David Nagoski, an ex-US Treasury Department official. It will earn about $27m from the bankrupt country, according to FT calculations. That is almost double what Ukraine paid for advice on its $18bn restructuring in 2015, according to people familiar with the deals.

The Bajan government hit back at the creditor criticism. “We believe it is excellent value for money given that through their efforts we have saved over $1bn of interest and principal. We would hire [White Oak] again.”

White Oak’s engagement letter indicates that the Bajan government agreed to pay the firm just over $21m for the successful restructuring of its roughly $5bn of domestic debts, excluding arrears. The letter was signed five days after Mia Mottley was sworn in as prime minister on May 25 last year, and two days before the government announced it was defaulting on its debts.

By any metric or rationale, the fee is outsized and unwarranted.

Sean Newman, Invesco
Negotiations with external creditors are ongoing. Once complete, the government is set to pay White Oak about $4m for restructuring approximately $910m of debt owed to foreign investors. The firm is also receiving an $85,000 monthly retainer.

It is likely to take at least another 12 months to finalise the deal, according to another person involved in the negotiations. The additional $2m in monthly fees brings the total payout from Barbados to roughly $27m.

“It is a disproportionate fee for a small country,” said one financial adviser.

“Barbados is not Greece, which had a massive debt stock, multiple debt instruments and huge political tensions,” the financial adviser said. “Double-digit fees are for very large transactions that are super complicated with a large number of instruments and a large number of different creditors.”

White Oak’s partners said the fee was justified because “placing this debt on a sustainable footing has required an unusually complex operation”. Its rates are “among the lowest charged in any Caribbean restructuring, again in relative terms”.

Barbados’s debts came to roughly 160 per cent of gross domestic product at the beginning of the restructuring in June last year, among the highest in the world.

Mr Espinosa and Mr Nagoski point out that their business in the country goes beyond the public restructuring and that they are not charging a fee for additional work. The pair say they are advising Barbados on several commercial contracts, as well as the restructuring of a number of state-owned enterprises and the country’s regional airline, of which the government is the largest shareholder.

However, few Caribbean debt restructurings have paid out fees in the tens of millions to financial advisers in recent years. Citigroup earned roughly $3m restructuring Jamaica’s $9bn of defaulted debts in 2013, and in Belize advisers were paid single-digit millions for the restructuring of more than $525m of debt in 2017, according to people familiar with both deals.