GOJ TAPS MARKET FOR US$1B

The Government of Jamaica (GOJ) has gone to the international capital markets to raise a US$1 billion ($157.62 billion) unsecured bond to support its liability management strategy and budgetary objectives. The prospectus was published on Wednesday through the United States Securities and Exchange Commission (SEC), three weeks after GOJ filed its registration statement to issue debt securities. According to a roadshow document seen by the Jamaica Observer, US$600 million is to be used to fund a tender/exchange offer, with the balance earmarked for general budgetary purposes. A source close to the matter also indicated that the new bond is expected to mature in 2037. At the same time, GOJ launched the tender/exchange offer for holders of the three existing global bonds, tying the new borrowing directly to its wider effort to manage the country’s external debt. “The Invitation is part of a broader program of Jamaica to proactively manage its external public debt,” stated the tender invitation to holders of the old bonds/notes. The Government of Jamaica is raising a US$1-billion bond on the international capital markets. (Photo: Naphtali Junior) The Government currently has US$837.53 million outstanding on its April 2028 notes, which carry a 6.75 per cent interest rate. The 2036 and 2039 notes have US$250 million and US$1.24 billion outstanding, respectively. International Financing Review (ifre.com) reported that GOJ began holding fixed-income investor meetings on September 3, likely in connection with the new bond issuance, which will be listed on the Euro MTF Market of the Luxembourg Stock Exchange. Citigroup Global Markets Inc. and Scotia Capital (USA) Inc. are serving as deal managers and joint lead underwriters for the transaction. If the value of bonds tendered exceeds GOJ’s maximum purchase amount, the government can determine how much of each series it will accept, applying different proration factors where necessary. This means it could accept less than the full amount tendered by holders of any of the eligible notes. The new tender offer opened on September 2 and will expire on September 9, unless extended or terminated at GOJ’s discretion. Settlement is expected to be completed by September 17. “The invitation is not conditioned upon any minimum participation of any series of Old Notes but is conditioned on, among other things, the pricing and closing of an international capital markets transaction in an amount and on terms and conditions acceptable to Jamaica,” stated the GOJ release. The Government last executed a transaction of this nature in October 2023, when it spent US$237.4 million to redeem three notes with a nominal value of US$233.2 million. At the time, GOJ repurchased approximately US$99.7 million in two separate 2025 notes and US$165.15 million of the April 2028 notes. The tender on the 2028 notes represented 11.6 per cent of the amount outstanding before the GOJ offer. That tender offer coincided with Jamaica’s first Jamaican dollar (JMD)-linked bond issuance on the international capital markets, worth $46.6 billion, or US$300 million. The instrument carried a 9.625 per cent interest rate and matures in November 2030. Through the new tender offer, GOJ can extend the maturity profile of its foreign debt and reduce the amount that will need to be refinanced in the near term, in keeping with its broader debt management strategy. The transaction, however, comes against the backdrop of a difficult start to the government’s 2026/27 fiscal year. According to the central government accounts for April to July 2026, revenue and grants came in eight per cent below budget at $353.84 billion for the four-month period. That was despite $18.04 billion in new taxes being implemented for the current fiscal year, with one company reporting that it paid $454 million in special consumption tax on sweetened drinks for May and June. The revenue shortfall was largely driven by tax collections coming in $21.32 billion below budget, including a $13.27-billion shortfall in taxes on companies. Expenditure was also six per cent below budget at $387.27 billion. The Government recorded a fiscal deficit of $33.43 billion, wider than the budgeted $30.89 billion. An overall surplus of $10.28 billion was recorded, compared with a budgeted deficit of $57.86 billion, largely because loan receipts of $130.62 billion were twice the budgeted amount. Based on the roadshow document, a successful bond raise would leave US$400 million, or approximately $63.05 billion, available for general budgetary purposes in the 2026/27 fiscal year. “The effects of this natural disaster may continue to adversely affect the development and performance of key sectors of the country’s economy,” GOJ’s prospectus stated, regarding the impact of Hurricane Melissa. The warning was included among the risk factors outlining Jamaica’s exposure to external shocks, including risks to the tourism sector. The prospectus added that volatility in global energy prices may also contribute to higher domestic energy costs for Jamaica and could place upward pressure on inflation. “While the full extent of the impact of these conflicts remains to be seen as of the date of this prospectus supplement, the effects of such conflicts could negatively affect Jamaica’s economic growth, inflation and fiscal revenues,” it said. Final pricing details, including the interest rate on the new GOJ bond, are expected to be revealed in the coming days. Until then, recent sovereign issues elsewhere in teh Caribbean ofer some indication of where borrowing costs have been landing. Trinidad & Tobago refinanced a US$1-billion bond in January at 6.50 per cent for 10 years before issuing a US$800-million bond at 6.20 per cent for 12 years. Trinidad currently carries a higher international credit rating than Jamaica, although S&P Global Ratings has assigned it a negative outlook, compared with Jamaica’s stable outlook.