Government offers to pay 90% face value of bauxite bonds
By Gordon French
Kaieteur News
January 31, 2007
As part of the latest offer to settle the outstanding payments on a quantity of bauxite bonds which matured on May 17 last year, Government has agreed to pay 90 percent of the face value of the bonds, along with interest stretching from January 1, 2006 to the date of settlement.
This is a complete turnaround on the part of government, since its previous position was to seek a minimum of 90 percent debt relief by applying Paris Club terms to the payment of the bonds, which would have seen the administration paying only 10 percent of the acquisition cost.
Government is awaiting a response to its new offer from Citizens Bank Guyana Inc. (CBGI) and other creditors who are currently holders of the bonds.
President Bharrat Jagdeo made the new offer during a meeting with the bank on January 12. Since last year, there have been ongoing meetings between the two and according to sources, government had shifted from the 10 percent payment to 50 percent and then 70 percent, before arriving at the new offer.
Managing Director of CBGI, Alan Parris said last week that the new proposal has found favour with the majority of the bond holders and that a meeting with the government will be convened shortly to communicate the position of the other participants.
In addition, the President indicated that government had “amicably” resolved the payment of the bonds.
Kaieteur News understands that an agreement has been drafted, with the signing set to take place shortly. Sources stated that January 31 would likely be the agreed date of settlement.
According to the Citizens Bank's 2006 Annual Report, the total maturity value of the bonds due for redemption on May, 17, 2006 amounted to $5.3 million.
Of that amount, $2.9 million was sub-participated to third parties and $2.4 million was retained by the bank.
It is estimated that during the period January 1 and May 17, 2006, Government should have paid interest of $97, 905, but that was never done.
However, holders of the bauxite bonds will benefit substantially, since as part of the new offer, Government will also pay interest up to the agreed date of settlement.
Citizens Bank is currently the holder of Government of Guyana bonds, originally issued to the creditors of the Guyana Mining Enterprise.
The company purchased the bonds from the creditors and also sub-participated portions of the bonds acquired to third parties, including several pension funds.
Citizens Bank had moved to the High Court claiming from the Government, the full maturity value and accrued interest for the period from January 1 to May 17, 2006 totalling 5.4 million.
The bank was also seeking interest on the maturity value of the bonds due for redemption on May 17, 2006 at a rate of 5 percent per annum from May 18, 2005 until fully paid.