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UPDATE 1-Suriname bondholders threaten to reinstate payments over IMF agreement

·2 min read

(Adds detail, context)

By Tom Arnold and Karin Strohecker

LONDON, May 7 (Reuters) - Suriname Eurobond creditors accused the government on Friday of breaching its obligation of negotiating its debt overhaul in good faith and said they could reinstate payments they previously agreed to defer.

Suriname, battling high inflation and the economic fallout of the coronavirus pandemic, has been seeking breathing space from creditors since last year to give the government time to secure funding from the International Monetary Fund (IMF).

Creditors last month agreed to defer payments of principal and interest on its 2023 and 2026 bonds, while the government last week reached a staff-level agreement with the IMF for $690 million in financing. There's around $675 million outstanding across the two bonds.

But the creditor committee said it was concerned the agreement was finalised without due input from bondholders, accusing the government of breaching its commitment made to creditors before the IMF deal.

"The committee believes that Suriname has already breached its obligation to negotiate in good faith, as required by the terms of the Eurobonds," the creditors said in a statement.

Therefore, the committee was positioned to exercise the Eurobond's "termination trigger", that would reinstate the payment and other obligations deferred by creditors.

Creditors will not able to do that before June 3.

Suriname's government did not immediately respond to a request for comment.

The committee also reiterated that any debt relief from external creditors must be based on equitable burden sharing.

It is the latest debt overhaul effort in the central and South American region to be beset by acrimony. Holders of Belize's so-called ‘Superbond’ this week urged the government to agree to an IMF programme as that country's bid for its fifth debt restructuring in 15 years threatens to turn sour.

Suriname's creditors also said they will not be able to consider debt relief proposals that take no account of the offshore oil and gas projects under development.

"You cannot just ignore that there will be a massive positive impact from oil and gas on fiscal and debt sustainability, and then for the purpose of a staff-level agreement, you're ignoring it," said one source close to the creditors.

The creditor committee holds in aggregate 43% of the 2023 and the 2026 bonds. Its members include Franklin Templeton Investment Management Limited, Eaton Vance Management, Grantham, Mayo, Van Otterloo & Co. LLC and Greylock Capital Management LLC.

Suriname's closely held 2026 bond was quoted at 70 cents in the dollar on Friday. News of the IMF deal in late April had lifted the country's bonds above the 70 mark for the first time since the pandemic roiled emerging markets in March last year.

(Reporting by Tom Arnold and Karin Strohecker, additional reporting by Ank Kuipers in Paramaribo; editing by Emelia Sithole-Matarise)