Big Benefits from Buyback – Byles

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The co-Chairman of the Economic Programme Oversight Committee, Richard Byles says there are numerous benefits to be derived from the buyback of the country’s Petrocaribe debt.

Mr. Byles, who’s the President and CEO of the Sagicor Group, says the debt buyback will save the country millions of dollars, even in the short term.

That’s because of the way the repayments are structured.

Mr. Byles says a significant point has been missed by some who’ve crunched the numbers, as they evaluate the merits of the double bond sale, versus the Petrocaribe loan.

He says the country will have to repay only interest on the double bond for the first few years.

Under Petrocaribe, Jamaica makes a payment on both the interest and the principal every year.

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Indeed, the principal payment on the larger of the two bonds, some USD$1.35-billion, is repayable in three equal parts in 2026, 2027 and 2028.

The Principal on the smaller bond, worth USD$650-million, is repayable in one lump sum in 2045.

So for the next 11 years, Jamaica will only have to repay some USD$106-million per year, according to Nationwide’s calculations.

Under Petrocaribe, annual repayments of both the interest and principal amount to $145-million.

That’s a saving of USD$39-million a year with the double bond.

But that good fortune only lasts a while.

Come 2026 when those bullet payments are due, Jamaica will have to come up with $556-million each year for three years.

After that, yearly payments will drop significantly, to just USD$38-million per year, until 2045 when the full principal of that bond is due,- USD$650-million plus interest.

However, according to Mr. Byles, when the time comes for those big payments, the government has the option of refinancing.

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For Financial Analyst Dennis Chung, the immediate short term benefit is what’s important.

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Mr. Byles, says the Petrocaribe debt buyback could result in significant changes to Jamaica’s current economic programme with the IMF.

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Mr. Byles says the deal could result in a reduction of the primary surplus target.

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