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House OK’s US$100m loan

Andrew Browne, [email protected]

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THE HOUSE OF ASSEMBLY yesterday approved the borrowing of US$100 million from Deutsche Bank AG London as a bridging loan.
The loan, originally sought from Scotia Trust & Merchant Bank Trinidad and Tobago, will be used to make certain payment obligations relating to the redemption of US$100 million, 8.75 per cent notes due on June 15.
The loan is a short-term measure pending the finalisation of the bond issue on the international capital markets approved by Parliament on March 31, 2010.
Prime Minister David Thompson, who introduced the resolution, in explaining the switch to Deutsche Bank AG London, said Scotia wanted to be appointed co-manager and “book runner” on Government’s $200 million bond.
“So what they were saying is we will bridge it but we want to lock you into an arrangement with Scotia,” Thompson said.
The Barbados leader said no one in the Lower House would have agreed to that proposal.
He noted that as a sovereign nation Barbados should have the right to the utmost flexibility in making decisions.
He added that within a day Government was able to accept an alternative offer from Deutsche Bank which it had already agreed would be the bank to be appointed as the lead manager on the bond.
He said Deutsche Bank had expressed a willingness to provide the bridging loan at half the arranging cost of the original offer, making this financing much more competitive.
He said the bank had agreed to provide the loan at a rate of three-month LIBOR plus 400 basis points to give an indicative all-in rate of 5.04.
Thompson said Deutsche Bank was not favoured initially since it had submitted a much higher cost and involved a more lengthy approval process based on its own credit approval strategy and the due diligence requirement of New York law.
He said the bank had since been able to fast-track the approval process and had agreed to use a much simpler form of legal documentation.
On this basis and on that of its ability to provide the US$100 million by June 11, Thompson said Government had accepted the offer.
He said the terms were quite clear and assured members of the Lower House that they would be informed of any developments.
Opposition Leader Mia Mottley supported the resolution but questioned the overall economic environment in which the loan was being obtained.
She said that the productive sectors in Barbados had not been performing at a satisfactory level over the past two years and called on Government to do more.
But in wrapping up, Thompson said the money borrowed by former Prime Minister Owen Arthur for a “rainy day”, which his administration was now seeking to repay, had been an unnecessary loan.
He added the interest on that loan alone could have gone toward those same productive sectors Mottley mentioned. (WG)