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Alternatives in debt exchange program: Painkiller or poisonous pill - Prof. John Gatsi

Feature Article Alternatives in debt exchange program: Painkiller or poisonous pill - Prof. John Gatsi
MON, 09 JAN 2023 LISTEN

There are two sides to an equation for easy comprehension. In a voluntary debt exchange program there are two groups of investors. Those who sign on to the debt restructuring program and those who will not . Those who do , have the future bond and investment profile designed for them including the maturity and the coupon. The future value of the new bond will depend on the market interest rate along the path of the bond.

What is not known is those who do not sign on to the debt exchange offer. What is the status of their bond? How will government treat such bonds after the deadline because the creditor-debtor relationship does not cease merely because they have not signed the offer? Government should clearly determine the treatment that awaits them. “They are on their own “is inappropriate, intemperate and must not be used. Some banks have circulated to individuals who invested in the bonds through them to sign on to such offers by 11th January to be able to meet the deadline of 16th January. Again, the alternative should be announced. Information is key for investors to make informed decisions. If they know the alternative they will assess the two positions and make a choice. What does the deadline of 16th January mean to those who are not interested in the program?

There are genuine cash flow reasons why the alternative should be announced. A retired professor with the understanding that investment is made for two main reasons: preservation of principal or to gain revenue for consumption while the principal continues to generate the revenue to take care of himself. How will this retired professor who depends on periodic interest income from bonds survive? If no clear position is announced for those in this category of retired professor, then the whole process becomes a poisonous pill. A reflection is needed. Losing money is not a problem for investors but the quantum and fairness of it is what may create problems for investors.

Sample message
Dear Client, We wish to inform you that all individuals who purchased GoG bonds through CalBank PLC are required to confirm their acceptance of the Debt Exchange Programme or otherwise by contacting their respective branches by Wednesday, January 11, 2023. Kindly access details of the GoG Exchange Program by clicking https://bit.ly/3induIw.

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