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Credit Suisse gone; ‘Blue Bond’ safe!

Belize’s recently restructured US$364 million Blue Bond is safe, even after its underwriter, Credit Suisse Bank, has collapsed being taken over by rival bank, UBS.

"From our perspective, recall that we are debtors to The Nature Conservancy (TNC) subsidiary, not to Credit Suisse or any 'Blue Bond' holder," Minister of State in the Ministry of Finance Christopher Coye told The Reporter on Thursday. "We have no direct relationship with Credit Suisse nor the 'Blue Bond' holders. We are not aware of whether Credit Suisse holds any bonds. Whether they do or do not, any Credit Suisse default or insolvency should not impact the direct relationship between Belize and the TNC entity."

While existing instruments are safe, the bank’s demise may lead to the decline of the debt-for-nature market and restructuring of deals moving forward, analysts opine.

The Switzerland-based global investment bank recently collapsed, forcing the Swiss government to broker a deal that saw Credit Suisse being purchased for US $3.2 billion.

Before its acquisition, Credit Suisse was a major contributor to the Nature Financing market, having orchestrated the world’s biggest debt-for-nature swap in Belize in collaboration with The Nature Conservatory (TNC) in 2021.

However, with the takeover, market analysts raise concerns over whether the market will recover from the absence of the failed bank should UBS choose not to fill the space Credit Suisse previously occupied. Without the support of Credit Suisse, analysts speculate that the loss taken by the market could potentially exceed US $800 million.

According to representatives from TNC who spoke with international media, Belize’s current debt-for-nature deals would not be affected by Credit Suisse’s collapse, and business would be conducted as usual.

However, negotiations that had not yet been concluded have come to a halt and may potentially be dropped. As a leader in nature financing investments, the bank was credited for having revived the market and opened it up to institutional capital for the first time. The bank was also responsible for structuring a US$150 million dollar deal in Barbados.

The nature of debt-for-nature swaps operates on the agreement that countries will invest the money saved from debt forgiveness into the conservation of their environment. Belize pledged to spend US$ 4 million annually until 2041 to protect 30 percent of its oceans. In order to garner funds for Belize and Barbados, the bank sought financing through the Teachers Insurance and Annuity Association of America (TIAA) units in Sweden by issuing blue bonds for the deals.

Credit Suisse claims that a multidimensional structure consisting of several “special purpose vehicles” was created to deliver payments separate from the bank after the deals are closed.

Market experts speculate that this SPV may be able to protect borrowers and investors from the bank’s acquisition, although sovereign debt experts have criticized the structure of these arrangements for its high cost and lack of transparency.

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