The London Club Offers the Cuban Government a Lifeline with Debt Relief

Loans to Cuba, which are rarely traded, now trade at about 10 cents on the dollar. (Flickr / Maxence)

14ymedio bigger14ymedio, Madrid, 27 April 2021 — CRF I Ltd., the London Club’s main creditor of Cuban debt investment fund, has offered the Government of Miguel Díaz-Canel to convert 1.4 billion dollars of the securities Cuba owes into a zero coupon bond with no payments until 2026, an offer that would allow Cuba to return to international markets, according to Bloomberg.

The economic agency had access to a letter addressed to the Cuban president containing the offer and that was sent on March 18, just before the Eighth Congress of the Communist Party, although the messages sent to Cuban diplomats and the president’s office did not were returned.

“Cuba may go from being in default with commercial creditors to regaining access to willing lenders in global financial markets,” says the letter from David Charters, president of the firm.

With this offer, 60% of the net present value of the debt that the Island has with CFR would be amortized, approximately four billion in loans and other securities.

The London Club, made up of the Stancroft Trust, Adelante Exotic and CRF funds, has been making offers of various kinds to Cuba since 2018 in order to collect the money owed.

In 2018, relief of an unknown amount was offered, described as an “opportunity to reach an amicable agreement” by Rodrigo Olivares-Caminal, coordinator of the Club.

Raúl Castro, who reversed his brother Fidel’s policy of not paying the debt, said that 2018 would be a “complicated year for the nation’s external finances,” but he was inclined to comply with the agreements made in the previous years with other creditors such as Russia and the Paris Club, which encouraged the British to make offers.

However, the lack of receptivity on the part of the Cuban side led CRF to file a lawsuit for non-compliance in a London court in February 2020. “The CRF board made it clear that the ongoing legal process will not stop unless there is a previously negotiated and satisfactory agreement with the Cuban government,” the company said in a statement.

After 30 years trying to collect the debt, Charters said: “We are losing patience. If [Cuba] wants to regain access to the international financial market, it has to fix this.”

The pandemic and the consequent worsening of the island’s economic situation make it difficult for the Government of Havana to be in a position to accept the offer, but, according to Bloomberg, if it is done, it could send a good signal to other investors and the Biden Administration.

“We urge you not to let this historic moment pass again, we expect a positive response and a commitment from you,” says the CRF letter.

During the time of the thaw with the United States during the Obama Administration, Cuba’s debt, including CRF values, recovered to 36 cents on the dollar as of the end of 2016. Today, however, loans, which are rarely traded, are now trading at about 10 cents one the dollar.

Cuba received significant relief in 2014 with the cancellation of 90% of its debt of 35 billion dollars with the former Soviet Union, of which the Russian Federation was the legate. Havana pledged with Moscow to invest the remaining 3.5 billion in joint projects on the island.

In 2015, the Paris Club and Cuba reached an agreement by which they forgave the Island 8.5 billion of the 11 billion dollars that it had accumulated in debt and interest since 1986 on the condition that Havana pay the remainder with a cap in 2018.

However, the agreed restructuring schedule has been breached as Cuba stopped paying some 85 million dollars in the last year and, although its creditors accepted a moratorium, they are considering imposing sanctions.


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