Clear air on White Oak
be “little-known” when, according to Avinash Persaud’s published letter in the Financial Times on May 14, of the 14 sovereign restructurings in the world since 2005, it has advised on seven, while the two major companies in that business, Lazard and Citi, did four and one, respectively.
Then there’s the fee. Paying out $27 million deserves explanation.
Government’s agreement with White Oak stipulates payment of 45 cents for every $100 saved. That is, the more money White Oak saved Government, the more it earned. It did its job. By wrapping up the local debt restructuring, Barbados’ credit rating rose three notches.
With that completed, Barbados’ debt has fallen from the third highest in the world at 175 per cent of gross domestic product, including arrears, to 125 per cent of GDP, and is on track for less than 100 per cent. Greece’s debt remains the second highest in the world.
Before this restructuring, Barbados was paying 68 cents out of every dollar in servicing its debts. That’s why there was little left to buy buses and garbage trucks, and fix roads. Now, the country is expected to pay less than 25 cents of every dollar for loan repayments.
What Government needs to explain is how it went about choosing White Oak.
That is, signing an agreement five days after the administration took over last May 25, and two days before announcing it was defaulting on its debts. And, was there a finder’s fee paid, and to whom?
IT IS EASIER to be wise after the fact than to make the difficult decision that was needed. As such, people can be more critical of decisions made when the outcome is already known, having not had the burdensome responsibility to deal with the particular matter initially.
Such is classic human behaviour and occurs at every level within society. In partisan politics, it is fodder for propaganda.
The reaction to the Financial Times article regarding the amount of money White Oak Advisory Ltd will earn from the restructuring of Barbados’ debt is one such scenario. Great wisdom is being expended after the fact. While Government needs to answer several questions in terms of transparency in this matter, we are cautious of the loud condemnation of the sum to be paid as those speaking have either a vested interest against Barbados’ foreign loans being restructured, or a political axe to grind.
The Financial Times article stated that “a little-known UK advisory firm stands to make about $27 million from the restructuring of Barbados’ $7 billion of debts — close to what Lazard earned seven years ago when it advised Greece on defaulted debt nearly 40 times bigger . . . . The size of the fee it will receive from its work on the default has outraged the Caribbean island’s creditors”. It further notes that White Oak’s engagement letter indicates Government has agreed to pay the firm just over $21 million for the successful restructuring of Barbados’ roughly $5 billion of domestic debts, excluding arrears; while it stands to earn about $4 million for restructuring about $910 million of debt owed to foreign investors.
Besides that, the firm is receiving an $85 000 monthly retainer. And it stood to make $2 million in monthly fees as the negotiations with the external creditors would take another 12 months to finalise, said an unnamed individual involved in those negotiations.
We question how White Oak could