Hurricanes don’t just destroy cities: they can also destroy sovereign finances. Hurricane Ivan, for instance, wiped out so much of Grenada’s infrastructure in September 2004 that by the end of the year the country was in default on its debt. Things were not helped when Hurricane Emily struck Grenada in July.
The Grenadian government tapped Bear Stearns to put together a comprehensive restructuring package, which was successfully completed in mid-October. Most distressed sovereigns make a distinction between domestic and foreign debt, either in terms of governing law or in terms of currency. Grenada, by contrast, decided to treat all debt equally – everything from dollar-denominated bonds issued under New York law to loans advanced in Eastern Caribbean (EC) dollars by domestic banks. Grenada even decided to include loans to local companies that were guaranteed by the government.
The total debt to be restructured came to just over $275 million, plus about $25 million in past-due interest. An 11-member creditors’ committee was put together, which accounted for $175 million of the debt.
New terms
In a throwback to debt restructurings of the 1980s, there was constructive dialogue between the creditor and its debtors.