Post on 29-May-2018
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Interaction of the Debt Management Office in
Jamaica with the International CapitalMarkets
4th Annual Meeting of Latin American & the
Caribbean Public Debt Management Specialists
Port of Spain, Trinidad & Tobago
May 14-16, 2008
Dian Black
Ministry of Finance and the Public Service
Kingston, Jamaica
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Contents
Introduction
External Financing & Execution Strategy
Composition of External Creditors
Relationship with External Players in the
International Capital Markets (ICM)
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Introduction
Government of Jamaicas medium term
borrowing programme guided by medium
term Debt Management Strategy
Debt Management objective To raise adequate levels of financing on behalf of the
Government of Jamaica at minimum costs, to develop
and implement strategies to ensure the long-termsustainability of the public debt while maintaining risk
at an acceptable level.
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Introduction
Key objectives of the Debt Strategy
Foster a more interactive relationship with the local and
international marketsExtend and smooth the maturity profile of the debt to
better manage refinancing risk
Increase the transparency and predictability of debt
issuance and operationsAddress aspects of liability management
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IntroductionJamaicas total debt J$ 1,000,676.5mn of
which :-
Domestic debt J$ 562,108.1mn ,
External debt J$438,568.4mn
Total Debt/ GDP 126.1%
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External Financing
Jamaica entered International CapitalMarkets (ICM) in 1997
Reasons for entering
Increased domestic interest rates resulting in high levels ofdomestic debt servicing costs
Advantage of lower external interest rates which would facilitatelowering of domestic interest rates
Exit from commercial bank restructuring in 1990 Graduation from Paris club bilateral rescheduling in 1995 no
longer a heavily indebted country
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Execution Strategy
Objective to access the ICM to the extent of gross external amortisation of the
external debt
to maintain good external debt indicators
Use of external advisory service external financial advisors provide valuable information
monitor developments in the markets
interface with investment houses to harness market intelligence
Foster relationship with investors
External Legal Counsel Selection based on range of services to be provided
lowest all-in costs for handling transaction
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Execution Strategy
Timing Monitor market developments with the assistance of the
financial advisors to determine appropriate time forentry
Schedule issues to coincide with maturities Interest ofInvestment house to go to market
Lead Manager
Determination based on Request for Proposals (RFP) RFP sent to financial institutions sometimes receiveunsolicited RFP
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Execution Strategy
Short listing based on the following criteria Low cost financing
Risk minimization
Diversification of investor base
Extension of maturity profile
Selection of Lead Manager based on Terms being offered tenor, currency
Lowest all in cost competitiveness of process helps to keep fees andexpenses low
Country coverage by financial institution
Support from secondary market
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Execution Strategy
Structure and Type of Bonds
Decision based on
Market conditions
Tenor based on portfolio needs, must be consistent with debt strategy objective of extendingmaturity profile of the debt
Ease of execution
Investors interest
Currency US$ usually first choice, - volatile although hedging opportunities exist, exchangerate risk implications
Size based on annual borrowing requirement as well as investors preference institutional
investors prefer liquid instruments while retail investors prefer smaller issues
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Execution Strategy
Marketing Meetings with investment banks to promote Jamaicas credit story
Develop relationship with banks and investment community
Road shows major European and North American cities Usually held at the time of issuance, also non-deal Conference calls
Presentations to investors by lead managers
Publication of research articles by lead managers
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Execution Strategy
Distribution
Geographic distribution initially investors dominated
from USA and Europe broadened to include Latin
America, Caribbean and Gulf states
Mainly Institutional investors Insurance companies,Pension funds, Mutual funds, Hedge funds, Banks,Money managers
Initially comprised of mainly retail investors
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Execution Strategy
Documentation
Offering Circular/ Prospectus
Comprised of historical and financial data ,legal, regulatory and taxation systems, political structure,relationship with the international investment community ,features of bonds, clearance and settlement andpayment systems
Underwriting Agreement Fiscal Agency Agreement
Purchase Agreement
Global Note
Initial Phase Bonds issued under Regulation S/144A under the US Securities Actwhich allow for sale offshore and to qualified institutional buyers in the USA
Since December 1991 US$ bonds issued under Schedule B Registration Statementwith the US SEC
February 2002 issued under Shelf Registration Programme
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Execution Strategy
Shelf Registration facilitates registration of securities intended for future
issuance
Benefits of Shelf Registration
o Greater flexibility
o Ability to access international capital markets at very short notice
o Ability to take advantage of favourable market conditions
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Composition ofExternal Creditors
March 2008
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Relationship with External Players
External Creditors
Multilaterals & Bilaterals
Loans from Multilaterals & Bilaterals for project Financing
Commercial Banks
also supply loans mainly for suppliers credit
Investors
Invest in Eurobonds
Conference calls
Roadshows
Provide information on web-site
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Relationship with External Players
Lead Managers
Provide market intelligence on an ongoing basis
Structure Bond issues
Provide Pricing indication for new issues
Propose appropriate marketing & distribution strategy
Arrange Investor roadshow
Provide coverage on Jamaicas credit story
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Relationship with External Players
Rating Agencies
Annual/quarterly review
On going dialogue
Quarterly conference calls
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Questions?