Tuesday, 17 July 2018

Seychelles eyes market return - sources

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The Seychelles is eyeing a return to the international bond markets, according to several bankers.

The island nation is still considering its options with its plans at an early stage, and as yet no banks have been mandated for a transaction.

However, one banker said a bond deal for up to about US$150m is a possibility, while another said the sovereign could tie in a new deal with a liability management exercise on its outstanding 2026 note.

A debt buyback would make sense given the small size of the economy.

“Seychelles is always on the lookout for liability management opportunities (hence the innovative debt buyback deal reached with the Paris Club earlier this year), and, as a result, often exchanges broad ideas with market participants,” said Sebastian Espinosa, managing director at White Oak Advisory, financial consultant to the government.

Espinosa declined to give further details.

In February, the government announced a buyback agreement with its Paris Club creditors tied to an environmental initiative. The transaction saw about US$30m of Seychelles’ debt transferred to a fund for marine conservation and to tackle climate change, said Seychelles President James Michel at the time.

Seychelles bought back over 90% of the debt maturities falling due to the Paris Club between 2015 and 2021 at a discount to face value becoming only the third country to buy back its Paris Club claims at below par through a market-based transaction.

If Seychelles goes ahead with a bond issue as well, it would be its first since it defaulted on US$320m of debt in 2008, comprising a €57.4m privately placed note, a US$230m 9.125% Eurobond and two commercial bank loans following a balance of payments crisis. The sovereign undertook a restructuring which resulted in a new January 2026 discount bond.

Those amortising notes were issued with a 50% discount on the principal amount tendered and start paying off from next year. Interest accrued from January 1 2010 with a step-up coupon structure ranging from 3%-8%.

There is also a partial guarantee on interest from the African Development Bank attached to the notes - the first time a multilateral provided such a guarantee on a bond coming out of a sovereign debt restructuring.

The US$169m bond is trading at a yield of of 9.30%–8.86%, according to Thomson Reuters.

Seychelles was upgraded to BB– by Fitch in July from B+, citing a “strong willingness” to execute structural reforms in accordance with its IMF programmes.

The multilateral agreed a two-year US$26.1m standby arrangement with Seychelles after the defaults in late 2008. A year later, the SBA was cancelled and instead a three-year US$31.1m Extended Fund Facility was agreed. That facility was subsequently extended for a further year, with a US$10m increase, before expiring in December 2013.

In June 2014, Seychelles agreed another three-year EFF with the IMF worth US$17.6m.



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