Thursday, January 21, 2010

Seychelles takes further step to cut debt burden

Seychelles has taken another big step forward in reducing its debt burden, the Ministry of Finance has said. It said the exchange offer to holders of existing debts, launched by the government on December 7, 2009, has received the overwhelming support of its creditors.

On expiry of the exchange offer at close of business on January 14, holders of debts totalling US $283 million – about 89% of the aggregate amount of Existing Instruments eligible to take part – had agreed to provide extensive debt relief to Seychelles by exchanging their claims on the country for new notes.

The participation rates by Existing Instrument were as follows:
● €54.75 million amortising notes due 2011 – 100%;
● US $230 million 9.125% notes due 2011 – 84%;
● Term loan agreement dated March 22, 1999 – 100%;
● Facility agreement dated June 2, 2003 – 100%.
As part of the exchange offer, creditors had the option to choose either new discount notes or
new par notes.

Because tenders for new par notes did not reach the US $50 million threshold specified in the conditions, tenders for these notes will automatically be treated as tenders for new discount notes in accordance with the terms of the exchange offer.

At the same time, the Ministry of Finance has announced that in accordance with the exchange offer it will now take the steps required to carry out the collective action clause embedded in the 9.125% notes due in 2011.

Once the extraordinary resolution specified in the prospectus is approved at a meeting of holders to be held on February 8, holders of the 16% that was not tendered will receive on the settlement date new discount notes in exchange for their 9.125% notes due in 2011.

Giving his reaction to the exchange offer success, President James Michel said: “Today is a very important day for the people of Seychelles. We are delighted with the outcome of the exchange offer and are appreciative of the cooperation and support demonstrated by our creditors.

“This transaction was critical to our efforts to transform our country’s economic outlook. The reforms we have undertaken have been far-reaching and have prepared us for a bright future.

“This result is further evidence that we are ready for that future.”
Finance Minister Danny Faure said: “With the results of the exchange offer, 50% of the full amount of external commercial debt eligible under the exchange offer will be cancelled.

“This transaction, combined with the impact of our 2009 Paris Club agreement, and of the restructuring arrangements that we are negotiating with other creditors, will ensure a sustainable debt burden for Seychelles.

“It is clear to us that creditors have been reassured by the fundamental changes that we are implementing in our country. The support that they have provided to us will strengthen our determination to press ahead with our reform agenda.”
The exchange offer is scheduled to be settled on February 11.

White Oak Advisory LLP acted as financial adviser to the government in this transaction, and Clifford Chance LLP acted as legal adviser.