Published: Wednesday June 18, 2008
Jamaica yesterday raised US$350 million (J$25 billion) on the international capital markets, through a 10-year placement that was fully subscribed at market close.
The 2019 notes were issued at a coupon of 8.0 per cent and priced to yield 8.375 per cent, which is about 400 basis points above comparable US treasuries.
The take up gives the Finance Ministry 57 per cent of the targeted J$43 billion (US$600 million) that it plans to tap from the big capital markets overseas. At 8.0 per cent, the 2019 has one of the lowest coupons of the GOJ global bonds in issue, comparable to the GOJ 2039.
Commendable
Its commendable, says Dean McDonald, assistant vice president economic analysis and research at First Global Financial Services that Jamaica was able to raise that level of debt financing from a market that is currently risk averse, but the pricing of the bond, he said, is likely to result in a correction to the market.
"This stands to affect the entire yield curve in a negative way, and indicate that GOJ bonds are not priced properly," said McDonald.
"Come tomorrow we will see bond prices fall to compensate for the higher yield."
The GOJ 2039 bond though similarly priced 8.0 per cent carries a yield of 8.18 per cent.
Philip Armstrong, senior vice president capital markets at PanCaribbean Financial Services Limited, had similar concerns but was more inclined to look at the bright side.
Many fiscal issues
"Although it (the bond) traded through the existing yield curve, we need to put things in perspective - Jamaica is a single B credit with many fiscal issues in an extremely hostile external environment, so to raise US$350 million at 8.375 per cent yield to maturity is very commendable," said Armstrong.
It's not immediately clear how heavily subscribed the offer was, but McDonald said the ministry's target was US$350 million.
Joint lead arrangers of the placement were Deutsche Bank and Morgan Stanley.
"The transaction was announced, launched and priced within four hours, the finance ministry said, closing at noon.
The bond will be redeemed in three equal tranches, over the years 2017 to 2019.
Jamaica's external debt is 'B' by Standard & Poor's; 'B1' by Moody's.
The country's national debt stock has risen above J$1 trillion since March 2008.
Source:
Sabrina Gordon
Jamaica Gleaner
http://www.jamaica-gleaner.com/gleaner/20080618/business/business1.html
sabrina.gordon@gleanerjm.com
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