Interaction of the Debt Management Office in

Jamaica with the International Capital

Markets
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 Jamaica’s 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-term
sustainability 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 markets
 Extend and smooth the maturity profile of the debt to
better manage refinancing risk
 Increase the transparency and predictability of debt
issuance and operations
 Address aspects of liability management

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 Introduction
 Jamaica’s 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 Capital
Markets (ICM) in 1997
• Reasons for entering
 Increased domestic interest rates resulting in high levels of
domestic debt servicing costs
 Advantage of lower external interest rates which would facilitate
lowering 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

 Local Registered Stocks

 Treasury Bills
Investment Debentures
 Variable Rate Investment Bonds
 Fixed Rate Registered Bonds
 US$ Indexed Linked Bonds
 US$ Denominated Bonds
 Land Bonds
 Commercial Loans

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 Execution Strategy
 Timing
• Monitor market developments with the assistance of the
financial advisors to determine appropriate time for
entry
• Schedule issues to coincide with maturities
• Interest of Investment house to go to market

 Lead Manager
• Determination based on Request for Proposals (RFP)
• RFP sent to financial institutions – sometimes receive
unsolicited 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 and
expenses 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 extending
maturity profile of the debt
 Ease of execution
 Investor’s interest
 Currency – US$ usually first choice, € - volatile although hedging opportunities exist,
exchange rate risk implications

 Size – based on annual borrowing requirement as well as investor’s 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 Jamaica’s 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 and
payment systems
• Underwriting Agreement
• Fiscal Agency Agreement
• Purchase Agreement
• Global Note
 Initial Phase – Bonds issued under “Regulation S/144A” under the US Securities Act
which allow for sale offshore and to qualified institutional buyers in the USA
 Since December 1991 US$ bonds issued under Schedule B Registration Statement
with 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 of External 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 Jamaica’s 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?

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