Journal Issue

Statement by the IMF Representative

International Monetary Fund
Published Date:
January 2010
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December 18, 2009

This statement provides information that has become available since the staff report was issued. This information does not change the thrust of the staff appraisal.

As anticipated in the staff report, on December 7, 2009 the authorities launched a debt exchange offer aimed at holders of external bonds, notes, and certain commercial bank loans (Box). Discussions with non-Paris Club official bilaterals and other external commercial creditors, largely banks, are also advancing. The authorities have been very conscious of the need to ensure comparability of treatment across creditor groups and are confident that the offer is comparable to terms agreed with Paris Club creditors. Should the offer be successfully concluded, some 70 percent of the end-2008 stock of external public debt will have been restructured.

Box: Commercial Bond Exchange Offer

The offer covers about US$320 million face value of remaining commercial external debt, including the US$230 million Eurobond, the €54.75 million amortizing note, and two other external commercial debts totaling US$9 million.1

  • In exchange for the extinguishing of their claims, creditors are offered the option of a discounted bond (for 50 percent of principal amount tendered) or a par value bond. The offer expires January 14, 2010, with final settlement in mid-February 2010.

  • The discount bond has a final maturity of 2026, with a grace period through 2015. Interest is fixed at 3 percent with step-ups in 2012, 2015, and 2018 to 5, 7, and 8 percent, respectively.

  • The par bond option has a maturity extended through 2041, with a grace period through 2037. Interest is fixed at 2 percent. The par bonds would only be issued if creditor tenders for this option would result in at least US$50 million being issued.

  • A goodwill cash payment will be made to tendering creditors in April 2010, in lieu of a portion of past due interest on the outstanding debt covered by the offer. The total cash payment will amount to about US$18 million.

1 The debt subject to the offer represents about 78 percent of the value of public external commercial debt outstanding, including arrears.

The offer is in line with program expectations and objectives. The program baseline assumes the exchange offer, and related cash payments, would be concluded by end-2009. The program has automatic adjustors to program targets on net international reserves to accommodate the exact timing of the settlement of the offer, expected in February 2010.

Staff have updated the debt sustainability analysis on the basis of the authorities’ offer and the results are very close to those shown in the restructuring scenario in the staff report Appendix II. Public external and overall debt ratios over the 2010-19 period range between 0.5–3.5 percent of GDP lower that in the staff report Appendix II. The standardized bounds test are materially the same as in the staff report, which indicate that even after full restructuring, Seychelles would remain very vulnerable to a variety of shocks.

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