Debt-for-nature swaps have firmly taken root in Latin America and the Caribbean, a region that’s lush with biodiversity.
Firms such as Clifford Chance and A&O Shearman have been particularly active in this space.
Bahamas
Hogan Lovells recently advised the government of the Bahamas in a debt conversion transaction that refinanced $300 million of external commercial debt. Debt service cost savings from the transaction will facilitate improved ocean conservation and management of the country’s marine protected areas to benefit biodiversity and people, and to lessen the effects of climate change.
The deal team was led by Hogan Lovells banking and capital markets partners Gordon Wilson and Tifarah Allen, both of whom are based in Washington, D.C.
The transaction was undertaken in partnership with The Nature Conservancy, represented by A&O Shearman energy, natural resources and infrastructure partner Cynthia Urda Kassis, who worked with international arbitration partner Christopher Ryan and litigation & investigations partner Paula Anderson.
“The Bahamas has been a leader in ocean conservation, and this financing will allow the country to continue its efforts to protect and sustain its precious marine ecosystems,” Urda Kassis said in a statement.
The Bahamas project marks The Nature Conservancy’s fifth nature bonds project, joining efforts in Seychelles, Belize, Barbados and Gabon. Combined, the five projects support protections and improved management of nearly 238 million hectares of ocean while allowing for the refinancing of $1.5 billion of debt.
A&O Shearman has been intimately involved in several of those projects.
The Inter-American Development Bank, represented by Norton Rose Fulbright partner Kenneth Hansen, together with several financial partners, will unlock an expected $124 million of new cash funding – plus an additional $8 million of endowment investment returns – for marine conservation by the Bahamas over the next 15 years without adding to the country’s debt.
Standard Chartered, advised by Clifford Chance partner Deborah Zandstra, will provide a U.S. dollar term facility to the island nation. That facility benefits from a partial credit guarantee from the IDB and a collateralized partial credit guarantee from Builders Vision, which was represented by Joe Stefano, head of DLA Piper’s U.S. projects & energy practice.
Clifford Chance said the Bahamas deal adds to its track record of advising clients on “cutting edge blended finance transactions for sovereigns and solidifies the firm’s position as a market leader in sovereign debt conversions and debt-for-nature swaps.” The firm has advised on similar transactions for countries such as Ecuador and Barbados.
The Bahamas transaction engaged credit from both private and multilateral sources in one deal, which Clifford Chance said demonstrates the increasing mobilization of private capital to address climate transition funding.
The Bahamas will use the proceeds to buy back international bonds in the market, as well as to prepay loan obligations.
The Bahamas has a strong record in marine conservation, with more than 17% of its nearshore environment designated as part of its National Protected Areas System.
El Salvador
White & Case recently advised El Salvador, a long-standing client, on the world’s largest debt-for-nature conversion for river conservation and in terms of the size of funding commitments for conservation.
The conversion involved the issuance of $1 billion in 20-year impact notes to a special purpose vehicle and the concurrent tender offer of a portion of El Salvador’s outstanding notes using the proceeds of the new impact notes.
Capital markets partners Olga Fedosova (Paris) and Ian Clark (London), together with M&A partner Prat Vallabhaneni (New York), advised El Salvador on the debt transaction.
The new notes were purchased by a special purpose vehicle from the proceeds of a loan from JPMorgan Chase Bank, advised by Clifford Chance partner Deborah Zandstra.
The conversion is expected to generate a $352 million in lifetime savings for El Salvador through a combination of immediate notional debt savings and material reductions in debt service costs.
Most of that savings will be applied to conservation and restoration projects over the next 20 years in the Rio Lempa basin, which is one of the longest rivers in Central America. This river plays a key role in the well-being of communities and the economy of El Salvador.
The U.S. International Development Finance Corporation provided political risk insurance, and the Development Bank of Latin America and the Caribbean, advised by Norton Rose’s Kenneth, issued standby letters of credit. This credit enhancement helped catalyze additional investment in El Salvador’s conservation and ecosystem restoration efforts in the Rio Lempa watershed.
A&O Shearman partner Alejandro Gordano represented Catholic Relief Services and the Fondo de la Iniciativa para las Américas of El Salvador, who will jointly manage the conservation program and collaborate with government water and environmental agencies to enhance water security, promote biodiversity and stimulate economic development in the Rio Lempa watershed.
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Publish date : 2024-12-13 01:39:00
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