Barbados seeks loan option after failing to tap bond markets

Tue Dec 10, 2013 11:53am EST

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NEW YORK, Dec 10 (IFR) - Credit Suisse is heard looking to syndicate a US$150m five-year amortizing loan extended to Barbados after the sovereign failed to successfully place a bond in October, according to market sources.

The loan offers a margin of Libor+700bp, has an average life of 3.5 years and an 18-month grace period, said a source with knowledge about the deal. "It is going to be a bit challenging, unless you have big local banks buy it," said the source, noting that the sovereign's outstanding 2021s and 2022s are trading near 9%.

According to a resolution posted on the Barbados Parliament's website, the government has been seeking to borrow up to US$225m in an effort to cover budgetary needs, including infrastructure projects and the bolstering of foreign reserves.

Credit Suisse AG Cayman Islands and First Caribbean International Bank are cited as joint lead arrangers and joint bookrunners on the US$150m loan, which carries a greenshoe option allowing the borrower to increase the size by an additional US$75m.

The applicable margin steps up by 50bp for each downgrade below BB- by S&P and Fitch or below Ba3 by Moody's. Alternatively, margins shrink by 25bp for each upgrade, provided that the rate does not go below the applicable margin established at the close.

According to the resolution document, there is an arrangement fee of 75bp of the facility amount, and a participation fee of 75bp-125bp of the facility amount. The loan also carries market flex clauses. The loan comes in the wake of the sovereign failed attempt to carry out a new issue and liability management operation in October.

At the time local institutional accounts declined to participate in a sovereign tender that involved taking an accounting loss by selling the country's existing 2021s and 2022s below par.

Barbados was looking to fund the up to US$250m tender through a new October 2025 benchmark bond, with initial price thoughts set in the 8.75% area. Deutsche Bank acted as lead, with CIBC coming in as co-manager. Expected ratings are Ba1/BB+.

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