Fijian regime turns to junk bond market to refinance debt

Fijian regime turns to junk bond market to refinance debt

By Paul McBeth

March 11 (BusinessDesk) – Fiji’s military regime has turned to the junk bond market to refinancing existing debt and gain working capital this year.

The South Pacific military dictatorship, ruled by Voreque Bainimarama since a 2006 coup, sold US$250 million of five-year unsecured bonds to refinance US$150 million of notes maturing in September. The balance is expected to fund capital works.

The bonds were sold at 9%, with a third of the bonds going to Asian investors and the remainder to American and European accounts, according to reports.

Rating agency Standard & Poor’s gave the issue a sub-investment grade ‘B-’ rating. That matches Fiji’s foreign currency rating, reflecting the agency’s view that the lack of hard data and the country’s persistent fiscal and current account deficits leave it vulnerable to default.

Still, S&P have Fiji on a positive outlook, contingent on improving the government’s books and attracting foreign aid.

New Zealand’s relationship with Fiji soured after the coup, hitting rock bottom at the end of 2008 as the Pacific nation expelled Australian and New Zealand diplomats. Since then, Foreign Minister Murray McCully has been working to improve relations since and he hopes to informally meet Bainimarama this month.

Parliament’s Foreign Affairs and Trade Committee supported the government’s diplomatic approach to Fiji, in a report on New Zealand’s relations with South Pacific nations, saying Fiji’s survival is in the interests of the region. It shied away from offering any specific strategies on the relationship, other than supporting the return to constitutional government.

“While we support the absence of restrictions on tourism, trade, or investment, we note that the private-sector investment needed for the country’s long-term development is unlikely to occur in the current environment,” the report said. “We also note that those who leave Fiji represent the skill loss the country can ill afford.”

(BusinessDesk)

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