MIMICS recently went on-site to the Central Bank of Barbados to assist in making several eleventh-hour changes in relation to the Debt Restructuring plan agreed to by the Barbados Government and the IMF. Per the IMF announcement:
“A comprehensive debt restructuring will complement the fiscal consolidation. The authorities have identified parameters that would provide debt relief without jeopardizing financial stability, and an exchange offer for domestic debt (Barbados dollar-denominated) to private creditors was launched on September 7, 2018. The proposed debt restructuring includes features, including a natural disaster clause, that are expected to help the authorities stay current on their future debt obligations. It is important to continue good faith negotiations with domestic and external creditors.”
This process was initiated with a June 1, 2018 announcement of a dramatic economic plan aimed at combatting an economy that has seen its debt skyrocket to unprecedented heights. The nation currently owes $15 billion, or 157% of the country’s GDP. By contrast, in 2007, the debt was $6.5 billion, as compared with a $9.1 billion GDP.
The new plan, known as the Exchange Offer, offers new debt instruments for holders of Treasury Bills, Treasury Notes, Debentures, loans and bonds owed by the government, loans and bonds owed by state-owned enterprises and other entities that receive transfers from the state budget and certain arrears owed by the government and its public sector.
The final details of the announcement were made in September 2018, with a take-effect date of October 5, 2018. This provided very little advance notice, both to Barbados government debt creditors and to the central bank itself, which is responsible for the back-office processing of all government debt.
The Central Bank of Barbados, which uses the MIMICS Debt Module to process Barbados public debt, immediately reached out to MIMICS for help. MIMICS and the central bank were able to come up with a list of required action items that needed to be accomplished, including:
· Analyzing and projecting the cash flows of many new “Series” of debt with complex cash flows (for example, those comprised of consolidated amounts across 11 strips calculated independently)
· Setting up the new Series and their projected cash flows
· Customizing an import to close out old debt holdings and issue holdings in the new Series’, including capitalizing all outstanding accrued interest, while retaining full history
· Customizing letters and forms based on the new debt structure
· Configurating various detailed rules and parameters related to the new debt structure
· Coordinating with the central bank on their data entry plan
MIMICS was able to provide the requested changes in the narrow timeframe provided, as well as to provide onsite assistance during it. A MIMICS representative spent a week onsite with the central bank, providing training and support on the new functionality in the MIMICS system.
MIMICS continues to provide ongoing support, as the situation evolves in Barbados. Updated plans are likely to be announced to provide additional relief to some segment of pensioner investors, and any changes to the plan by the government will be addresses by the central bank and MIMICS.
MIMICS is pleased to be able to help the central bank in these trying times, and wishes them all the best with the implementation of the new regulations.