Debt exchange: Government to pay 2% cash fee to bondholders

The Finance Ministry has stated that bondholders will receive a 2% compensation cash fee.

According to the Ministry, this is to make up for the extension of maturities after it announced the debt exchange programme.

In an Amendments to the Invitation to Exchange to bondholders, the government said there are 12 new bonds in the Amended Exchange, instead of four, with a new coupon rate structure.

“Given that holders of Eligible 2023 Bonds are being asked to extend the maturities of what are now effectively short-term instruments, investors will receive a cash tender fee of 2% of the outstanding amount of such 2023 Bonds tendered and accepted, to compensate for the maturity extension,” it explained in the Amendments to the Invitation to Exchange.

The Ministry also added that the accrued interest up to January 24, 2023, will be paid to all Eligible Holders participating in the exchange, in a capitalized form.

“Investors indicated a preference for having more numerous bonds with standard bullet bonds, instead of fewer, larger, and more liquid bonds (the previous structure), which has been reflected in the amended exchange. In the same spirit, the amended coupon structure for the new bonds has been designed to mimic a yield curve with a standard shape,” the statement said.

The government announced on December 24, 2022, that individual bondholders who were initially exempt from the debt exchange programme were now included.

That meant that only Treasury bills are exempt from the programme.

Meanwhile, the individual bondholders have rejected the government’s decision.

SSD/FNOQ