News Americas, NEW YORK, NY, Thurs. Nov. 9, 2023: The Jamaican government has achieved a significant financial milestone by issuing its first-ever Jamaican Dollar (J$) linked international bond, totaling J$46.6 billion or US$300 million. The bond, issued on November 3, was oversubscribed 1.4 times and consists of Senior Unsecured Notes due in 2030, registered with the United States-based Securities Exchange Commission, (SEC).
This groundbreaking operation marks the Government of Jamaica’s inaugural J$-linked transaction in international capital markets and aligns with the GOJ’s objective to open local currency debt issues to international investors. The move aims to reduce the GOJ’s exposure to USD-denominated debt, as both interest and principal payments are linked to the value of the Jamaican dollar.
However, it’s essential to note that while the bond is denominated in J$, debt service payments to bondholders will be in US$, determined by the average of the prevailing J$ exchange rate over the ten business days before each payment date. This arrangement means that international investors in this bond assume Jamaican Dollar exchange rate risk.
The bond issuance represents the second phase of a liability management operation, with the proceeds from this Jamaican dollar-linked bond being used to repurchase outstanding US$-denominated bonds.
Moody’s, the international credit rating agency, published an Issuer’s Comment, stating that the use of the J$ linked Bond issuance proceeds to buy back outstanding USD-denominated bonds will reduce “the government’s exposure to foreign-exchange risk, which is a credit positive.” Over time, this reduction in exchange-rate risk is expected to address one of the sovereign’s key credit challenges.
In the initial phase of the transaction, Jamaica invited offers to tender for cash, targeting its 7.625 per cent Notes due 2025, 9.250 per cent Notes due 2025, and 6.750 per cent Notes due 2028. This offering achieved several significant milestones, marking the first J$-linked transaction by the Jamaican government and demonstrating the success of local currency deals in international markets.
International investor participation in the J$ link bond reached 93.5 percent, with 6.5 percent coming from domestic investors. This represents the highest participation rate by international investors in a local currency issue in 2023 globally. The bond is also noted for having the lowest coupon and yield for a local currency-linked global bond transaction in 2023 to date, marking Jamaica’s first return to the international capital markets since 2019.
Dr. Nigel Clarke, Jamaica’s Finance and Public Service Minister, led a Jamaican delegation on an investor road show in London and New York related to the bond issuance. He emphasized the transaction’s significance in opening new possibilities and frontiers for Jamaica, highlighting the country’s improved macroeconomic fundamentals and monetary policy transparency.
Dr. Clarke stated that tapping international investors for local currency-linked debt enhances Jamaica’s funding sources, broadens financial diversity, and paves the way for more international issues in the future. The government’s ability to alter the currency mix of the national debt is expected to strengthen the country’s resilience and financial stability.
This landmark development represents a substantial policy dividend resulting from Jamaica’s economic progress and commitment to monetary policy transparency, central bank independence, and low, stable, and predictable inflation as a monetary policy objective.
Jamaica’s inaugural J$-linked international bond marks a significant step towards financial independence and economic growth, offering new opportunities and strengthening the country’s position in the international financial market.