House Approves Gov’t Guarantee of Loan to NROCC

first_imgFacebookTwitterWhatsAppEmail The House of Representatives approved a Government guarantee for a loan of Euro 204.4 million from the Development Bank of Jamaica (DBJ) to the National Road Operating and Construction Company Limited (NROCC) on Tuesday May 19.Minister of Finance and the Public Service, Hon. Audley Shaw, who moved the resolution, explained that the guarantee had become necessary because of the volatility in the global exchange rate, which had exposed NROCC and by extension, the DBJ, to very significant exchange losses in respect of the 204 million EURO loan that was secured by the previous Government from Bandes, Venezuela, to fund the operations of NROCC.“These losses were further compounded by the fact that the proceeds of the Bandes loan were placed with the Bank of Jamaica in Jamaican dollar denominated deposits, in response to mounting exchange losses, which, in the 2007/08 fiscal year, had accumulated (to) some $4 billion,” Mr. Shaw said.“The DBJ, with the concurrence of the Ministry of Finance, entered into a cross-currency swap, through Citibank, which fixed the exchange rate on all future Bandes coupon payments at a rate of 1 Euro to US$1.52,” he added.Mr. Shaw further explained that Citibank has stipulated as a condition of the cross currency swap, that the Government guarantee the performance of DBJ’s obligations in relation to the credit conditions of the transaction.“The amount of this guarantee is at US$79 million, which represents the absolute worst case exposure. In other words, this amount is not an amount that is necessarily going to be spent. But the worst case scenario is that it will result in US$79 million exposure and in circumstances where both Euro and US dollar exchange rates and interest rates move against the DBJ position,” he said.He further stated that “it was important to note that this was a contingent guarantee, and would only be called upon in the most extreme of circumstances.”“The existence of this guarantee will also relieve the DBJ of the obligation to fund future margin collateral payments, which would have otherwise strained its financial resources,” Mr. Shaw noted.He further added that the guarantee will not affect the debt ratio of the Government. RelatedHouse Approves Gov’t Guarantee of Loan to NROCC Advertisements RelatedHouse Approves Gov’t Guarantee of Loan to NROCCcenter_img RelatedHouse Approves Gov’t Guarantee of Loan to NROCC House Approves Gov’t Guarantee of Loan to NROCC ParliamentMay 21, 2009last_img


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