Government of Barbados in $774 Million External Debt Restructuring

January 21, 2020

Cleary Gottlieb is representing the government of Barbados in its $774 million external debt restructuring.

The government exchanged English-law and Barbados-law governed U.S. dollar debt instruments for new bonds due 2029, PDI bonds, and cash consideration. The exchange represented a reduction of more than 26% in the aggregate sum of the outstanding principal amount of the government’s debt obligations and past due and accrued interest. The external exchange was launched on November 5, 2019, and settlement of the new instruments commenced on December 11, 2019.

Both the 2029 bonds offered in the external debt restructuring and the new bonds offered in the domestic debt exchange included an innovative “natural disaster clause” that allows Barbados to improve its financial resilience in the event of a natural disaster. The clause will enable the government to capitalize interest and defer principal maturities due on the new bonds for two years following an earthquake, tropical cyclone, or rainfall event covered by its insurance policy.

This exchange makes Barbados the only country in the world whose public debt stock is climate resilient as a result of the inclusion of a natural disaster clause in its bonds. Such clauses enable issuers to redirect funds toward more pressing humanitarian needs in the wake of a natural disaster and avoid a default on their debt obligations.

The external debt restructuring follows on from Cleary’s representation of the government of Barbados in 2018 in its domestic debt restructuring of B$11.9 billion (equivalent to $5.95 billion) in Barbados dollar-denominated claims on the government and its public sector—a central plank of the government’s Comprehensive Debt Restructuring Programme and the Barbados Economic Reform and Transformation (BERT) Plan, which is supported by a four-year extended fund facility from the International Monetary Fund.