By Marc Jones
LONDON (Reuters) – Grenada has become the first country in the world to use a so-called hurricane clause in a government bond – a special feature that allows authorities to postpone debt payments in the wake of a major natural disaster.
The move comes after hurricane Beryl wrought destruction in parts of the Caribbean last month, including in Grenada where Prime Minister Dickon Mitchell estimated it had caused damage equivalent to roughly a third of its annual economic output.
In a notice to the holders of one of its only international bonds, the Grenadian finance ministry said it had “elected to make a Deferral Claim as a result of the Event”, adding the “modelled loss” to the economy from Beryl was greater than $30 million.
It means Grenada will not make the bond’s next two scheduled payments due on Nov. 12 and May 12 next year. Instead the money will be added on to the bond’s lump sum “principal” payments due pro rata until the end of the $112 million bond’s term in 2030.
The move is landmark step. It’s the first time a country has triggered a natural disaster clause in one of its bonds.
Grenada was also the first to include this kind of clause in a bond back in 2015. A number of other countries have followed suit although some versions, including in Jamaica, have not been triggered in the wake of Beryl.
(Reporting by Marc Jones; Editing by Sharon Singleton)