Finance

Suriname bondholders are threatening to resume payments through the IMF agreement

suriname-bondholders-are-threatening-to-resume-payments-through-the-imf-agreement

By Tom Arnold and Karin Strohecker

LONDON (Reuters) – Suriname Eurobond creditors on Friday accused the government of breaching its good faith obligation to negotiate its debt revision and threatened to resume previously agreed payments.

Suriname, battling high inflation and the economic fallout from the coronavirus pandemic, accused the bondholders’ committee of making false statements and called on it to “reconsider this ill-informed practice.”

Creditors agreed last month to defer payments on bonds worth $ 675 million, but said on Friday that Suriname had not allowed them sufficient participation in a staff-level financing agreement with the International Monetary Fund of $ 690 million.

“The committee believes that Suriname has already breached its obligation to negotiate in good faith as required by the terms of the Eurobonds,” creditors said in a statement.

Therefore, the committee is able to exercise the “termination trigger” of the Eurobond, which would reintroduce payment and other obligations postponed by the creditors.

Creditors cannot do this until June 3rd.

In a strong press release, Suriname said creditors had been given ample opportunity to provide feedback.

“There are few, if any, examples of countries in dire straits that have made such efforts to be transparent to private creditors prior to () reaching a staff-level agreement,” said Suriname.

“The people of Suriname will bear much of the burden of the adjustments needed for a better future, but Suriname’s international creditors have a vital role to play”.

It is the latest debt overhaul in the Central and South American region to be ravaged by severity. The owners of Belize’s so-called “Superbond” this week called on the government to agree to an IMF program as this country’s offer for the fifth debt restructuring in 15 years threatens to turn sour.

Suriname creditors also said they cannot consider debt relief proposals that do not take into account the offshore oil and gas projects under development.

“You can’t just ignore that oil and gas will have a massive positive impact on tax and debt sustainability and for the sake of a staff-level agreement you ignore that,” a source close to creditors said.

Suriname said in its statement that the IMF had recommended excluding unproven oil reserves in its debt sustainability and macroeconomic analysis.

The creditors’ committee holds a total of 43% of the 2023 and 2026 bonds.

Its members include Franklin Templeton Investment Management Limited, Eaton Vance (NYSE 🙂 Management, Grantham, Mayo, Van Otterloo & Co. LLC and Greylock Capital Management LLC.

Suriname’s tightly held bond of 2026 was quoted at 70 cents in the dollar on Friday.

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Steven Gregory