Netherlands takes over almost all of Curaçao's remaining debts

The Netherlands has taken over almost all debenture loan issued by Curaçao to pay the remaining debt within the framework of the debt reconstruction.

The Central Bank of Curaçao and St. Maarten that registered the debentures on behalf of Curaçao announced the results of the allocation of the debenture loan.

In the negotiations for the debt reconstruction, the local negotiators insisted that the Dutch government have a standard invitation to subscribe to debenture stocks of Curaçao and St. Maarten. For Curaçao this is a series of five loans for a total amount of almost 1.7 billion guilders, with an interest percentage between 2.51 and 2.98. On the first debenture stock of 100 million guilders with a 10-year period, one subscribed for the entire amount. All subscriptions were accepted against 2.51 percent return. 81.98 percent of this loan was allotted to the Dutch government and only 18.02 to local investors.
On the second debenture stock for an amount of 150 million guilders, one subscribed for 140 million guilders and entirely accepted. This loan regards a 15-year period with a 2.78 interest percentage. The Dutch government was allotted 99.81 percent of this loan and only 0.19 percent of this loan went to local investors. The third debenture stock for an amount of 375 million guilders with a 20-year period was registered for 370 million guilders and was entirely accepted. This loan went entirely to the Dutch government, and the return is 2.90 percent.
The fourth debenture stock of 475 million guilders with a 25-year period was registered entirely. This loan has a return of 2.96 percent and was allotted to the Dutch state for 99.98 percent, but only 0.02 percent to local investors.
The fifth and last debenture stock regarded an amount well over 585 million guilders with a 30-year period. This entire amount was subscribed, and accepted entirely against a 2.98 interest percentage. This entire loan went to the Dutch government as well.
The reason that the Dutch government took over almost everything is that the interest percentage is not attractive for local investors. Compared to Curaçao, the interest percentages are lower in the Netherlands, and the Dutch government registered in conformity with the percentages valid in the Netherlands.

In first instance, it is advantageous for the Curaçao government as they often paid percentages between 8 and 12 percent on issued debenture stocks in the past. Now they pay a much lower interest and it is the Dutch government who runs the risk they will be stuck with the debenture stocks because have less value with the low return, if the interest percentages on debentures increases – which one expects will happen.

For local investors it is not attractive to receive so little interest on their investments, certainly not if one considers the fact that these local investors, such as pension funds, maintain a calculation interest of approximately 4 percent in connection with payment of pensions in the future. However, in general these local investors may only have approximately 50 percent of their invested capital abroad. Therefore, the remainder must be invested locally, but if this couldn’t be done in a profitable manner this could cause problems in the future for the payment of pensions. This could lead to an increase of pensions premiums, which could imply a cost increase for both employee and employer (including the government).

St. Maarten
The Central Bank also issued a series of five debenture stocks for St. Maarten for a total amount of 296 million guilders. The interest percentage is between 2.5 and 3. One can subscribe to these loans on Monday. Expectations are that the Dutch government will take over almost all of these loans as well.

(Source: National Newspaper Amigoe)

16 October 2010

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