Finance Ministry: Bondholders who accept debt exchange programme to receive 2% cash fee
Bondholders who accept Government’s invitation to exchange their current bond holdings for new bonds are to receive 2% cash fee, the Ministry of Finance has said.
According to the Ministry, this is to compensate for the maturity extension of the new bonds.
It said the investors will only get new bonds maturing between 2027 and 2033.
“Given that holders of Eligible 2023 Bonds are being asked to extend the maturities of what are now effectively short-term instruments, investors will receive a cash tender fee of 2% of the outstanding amount of such 2023 Bonds tendered and accepted, to compensate for the maturity extension”, it explained In the Amendments to the Invitation to Exchange.
It emphasised that the government has decided to proceed with paying interest accrued up to January 24, 2023 to all Eligible Holders participating in the exchange, in a capitalised form. This means that the accrued interest will be added to the notional amount of the new bonds.
The Invitation to Exchange also stressed that there are 12 new bonds in the Amended Exchange, instead of four, with a new coupon rate structure.
“Investors indicated a preference for having more numerous bonds with standard bullet bonds, instead of fewer, larger and more liquid bonds (the previous structure), which has been reflected in the amended exchange. In the same spirit, the amended coupon structure for the new bonds has been designed to mimic a yield curve with a standard shape,”government remarked in its Amended Invitation to Exchange document.
Meanwhile, Government, has said the current economic challenges facing the country is set to worsen if individual bondholders fail to accept government’s invitation to exchange its “old bonds” for “new” government bonds.
According to government, the success of the debt exchange programme is necessary to restoring macroeconomic stability.
Adding that, were the participation of individual bondholders in the exchange programme too low, the government’s efforts to resolve the current crisis would be jeopardised as well as its capacity to honour its debt obligations.
The government has therefore encouraged individual bondholders to voluntarily tender their bond holdings under the debt exchange programme.
