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

Bondholders will receive a 2% compensation cash fee, according to the Finance Ministry.

According to the Ministry, this is to compensate for the extension of maturities following the announcement of the debt exchange program.

The government stated in an amendment to the Invitation to Exchange to bondholders that the Amended Exchange contains 12 new bonds, rather than four, with a new coupon rate structure.

“Because holders of Eligible 2023 Bonds are being asked to extend the maturities of what are now effectively short-term instruments,” it explained in the Amendments to the Invitation to Exchange.

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

“Investors indicated a preference for more bonds with standard bullet bonds, rather than fewer, larger, and more liquid bonds (the previous structure),” according to the amended exchange. In the same vein, the new bonds’ amended coupon structure was designed to “mimick a yield curve with a standard shape,” according to the statement.

On December 24, 2022, the government announced that individual bondholders who had previously been exempt from the debt exchange program would now be included.

As a result, only Treasury bills are exempt from the program.

Individual bondholders, meanwhile, have rejected the government’s decision.

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