Imbert: Govt scramble to pay $660M debt

Government has to “scramble” to find $660 million by next week in order to repay a debt obligation initially incurred in 2000, Finance Minister Colm Imbert revealed in Parliament on Friday evening.

The debt was raised via a private placement bond issued by Citibank, under the direction of the finance minister, Brian Kuei Tung, for 11 billion Japanese yen and was supposed to have matured in 2030. But, Imbert said in his closing arguments to the Finance Bill, because of an “unprecedented” clause in the private placement memoranda, the deal allowed for a “put option” that allowed the noteholder to reclaim 100 per cent of the principal amount, plus interest, within 15 days, should TT’s credit rating fall below the international agencies’ Standard & Poor’s credit rating of BBB- or Moody’s Baa3.

In April 2017, TT was downgraded by Moody’s from Baa3 to Ba1, albeit with a stable outlook.

Imbert said the noteholder—whom he declined to name just yet, only to say it was not Citibank—had acquired the entire bond option earlier this year. They wrote Government in November and triggered the put option clause.

“The Government had absolutely no wiggle room. We wrote the holders of the notes and asked for forbearance and they said no. So next week, the Government has to find $660 million (approximately US$100 million) in foreign currency, because the bond was in Japanese yen, to pay off this facility,” Imbert said.

He also noted another deal where a previous finance minister, this time Gerald Yetming, who also made an investment that ended up costing the country when the cabinet in 2001 agreed to a cross-currency swap. A cross-currency swap is an agreement between two parties to exchange the principal and interest payments of one loan for another of the same value but in another currency. Imbert said the government had entered into this agreement, hoping the Japanese yen would depreciate, but the gamble didn’t work out, costing the country nearly US$24 million—or close to TT$200 million.

And a third deal, this time in 2013 under Larry Howai, happened when the country was attempting to raise US$500 million, and was presented with a proposal to gamble on US interest rates—that they would soon rise.

“Unfortunately, they did not. US interest rates were much lower than anticipated when the swap was done. Because the rates didn’t increase, Government has had to pay out US$91 million—or TT$600 million earlier this year,” he said.

In total, he said, the Government’s loss was about TT$1.5 billion. The three finances ministers were under the UNC administrations of Basdeo Panday and Kamla Persad-Bissessar.

The Finance Bill, 2017, was passed in the Lower House Friday night.