Cleary Gottlieb represented the government of Barbados in an innovative debt conversion for nature transaction that will provide savings of approximately $50 million to support environmental and sustainable development objectives.
The transaction involved Barbados entering into a $146.5 million-equivalent dual currency “blue” term loan, with Credit Suisse International acting as global lead arranger for a USD tranche and CIBC FirstCaribbean Limited acting as domestic lead arranger for a BBD tranche. The Inter-American Development Bank provided a guarantee of up to $100 million and The Nature Conservancy provided a guarantee of up to $50 million in respect of the blue loan. The proceeds of the blue loan were applied in a concurrent buyback of a portion of Barbados’ existing Eurobonds due 2029 and domestic Series E debt due 2043. Simultaneous signing and utilization of the blue loan occurred on September 20, 2022, and settlement of the buyback of the Eurobonds and Series E debt occurred on September 21, 2022.
The conversion of outstanding debt owed by Barbados is expected to generate savings of approximately $50 million over the next 15 years. Under the terms of certain conservation agreements entered into with The Nature Conservancy, Barbados will direct savings into the Barbados Environmental Sustainability Fund (BESF), which will oversee and fund marine conservation and other environmental and sustainable development projects in Barbados, as well as into an endowment trust to fund long-term marine conservation efforts in Barbados. In addition to the funding of the BESF and endowment trust, Barbados is committed to a number of conservation commitments and milestones, including the protection and management of up to 30% of Barbados’ Exclusive Economic Zone and Territorial Sea—an area of more than 55,000 square kilometers.
The blue loan incorporates a variant of the “natural disaster clause,” which Cleary previously developed as part of Barbados’ 2019 debt restructuring. The natural disaster clause allows for payment deferral of the blue loan upon the occurrence of certain climate-related events, as well as in the case of a future pandemic. This is the first use of a “pandemic event” trigger in a natural disaster clause.
White Oak Advisory acted as financial advisor to the government of Barbados.