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Clifford Chance advises Credit Suisse and CIBC FirstCaribbean on innovative debt conversion for Barbados

26 September 2022

Clifford Chance advises Credit Suisse and CIBC FirstCaribbean on innovative debt conversion for Barbados

International law firm Clifford Chance advised Credit Suisse and CIBC FirstCaribbean ("CIBC") on an innovative debt conversion transaction for Barbados, which was announced by Barbados and The Nature Conservancy ("TNC"), who provided conservation advisory services and a secondary guarantee for the transaction.

The transaction involved Credit Suisse (via an SPV) and CIBC providing US Dollar and Barbados Dollar term facilities (the "Facilities") to Barbados, which are guaranteed by the Inter-American Development Bank ("IDB") and TNC, with Barbados using the proceeds to buy back certain international and local bonds in the market.

Barbados will direct the fiscal savings resulting from the debt conversion, realized through lower debt service payments on the Facilities compared to the bought back bonds, to the Barbados Environmental Sustainability Fund ("BESF") via a Conservation Funding Agreement. The BESF, which is expected to receive approximately USD 50m over the next 15 years, will fund marine conservation and other environmental and sustainable development projects in Barbados. Alongside the funding, Barbados will commit to a number of conservation commitments, including to protect and sustainably manage up to 30% of its Exclusive Economic Zone and Territorial Sea – an area of more than 55,000 square kilometres.

A unique component of the Facilities is that it incorporates a new development in debt sustainability, building upon the framework that Barbados has championed and pioneered by way of climate resilient debt instruments, by adding an option to temporarily suspend debt servicing in case of a future pandemic (in addition to following the occurrence of a natural disaster).

Clifford Chance also advised Credit Suisse on a simultaneous repackaging of the USD tranche of the Facilities into two series of Blue Bonds.

The successful execution of the deal adds to Clifford Chance's established track record of advising clients on cutting edge ESG and blended finance transactions for sovereigns.

Clifford Chance partner Deborah Zandstra, who led on the transaction, said "We are delighted to have worked on this landmark debt conversion transaction, which harnesses debt conversion techniques and blended finance to support marine conservation objectives whilst embedding pandemic with climate resilient features for the first time in such a transaction."

Deborah Zandstra was assisted by core team Azam Taiyeb, James Kelton, Amy Hillier and trainees Philipp Ershov and Caroline Smyth.

The team were further assisted by lawyers across the Clifford Chance network, including Jessica Littlewood, Audley Sheppard KC, Jon Zonis, Avrohom Gelber and Jemma Dick.