Sovereign Restructuring of the Year – The Republic of Suriname

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Administrator General of Suriname Debt Management Office Malty Dwarkasing Suriname’s economy is dramatically different today than in May 2020 when President Chan Santokhi took office.

That year, the economy shrank by 16%, the budget deficit was inching toward 10% and inflation was 59%. The country’s debt-GDP ratio was a whooping 148%. The country was broke and very few expected a marked improvement any time soon.

Yet Suriname proved the skeptics wrong. The economy is now forecast to expand by 3% in 2024 with a budget deficit of 1%. Inflation was 9.7% in the first 11 months of the year. The debt to GDP ratio is 78% and trending down.

“We inherited a desperate situation and we take pride in what we achieved,” says Finance and Planning Minister Stanley Raghoebarsing. “We have made great strides, but we must remain careful and cautious.”

The turnaround was facilitated by two crucial decisions: adopting an International Monetary Fund (IMF) extended fund facility in December 2021 and, two years later, successfully concluding a $1.5 billion debt restructuring which included bondholders as well as official bilateral debt (to India, China and the Paris Club of nations) and commercial bank debt.

The IMF plan provided Suriname with nearly $690 million for its fiscal rebalancing program. Meanwhile, the debt restructuring – the first such sovereign restructuring completed since the pandemic – was critical for the country’s economic rehabilitation, dramatically lowering its debt service obligations by almost $1 billion over a six-year period through 2026.

One of the final steps in the restructuring was a deal with bondholders in a transaction that completed in December 2023. That transaction targeted $912 million in 2023 notes with a 12.875% coupon and 2026 notes with a 9.24% coupon; bondholders agreed to a new 10-year instrument with a 7.95% coupon, accepting a 29% haircut, according to Lazard which advised the government.

A novel feature of the restructuring was its use of a value recovery instrument (VRI) – the first instrument of its kind issued in a sovereign debt restructuring – tied to the country’s future oil wealth. Under the mechanism, Suriname agreed to use 30% of annual royalties from offshore oil block 58 to compensate for the losses incurred in the restructuring. The VRI, which will only work if Suriname does receive royalties, will kick in after the Surinamese government receives the first $100 million from oil for its domestic coffers.

Raghoebarsing says the VRI is a win-win mechanism, because bondholders will receive compensation and Suriname will still have a windfall from oil through taxes, profit sharing and dividends.

Block 58 is a joint venture of France’s TotalEnergies and U.S.-based APA. They announced a final investment decision in October 2024 to move ahead with a $10.5-billion investment in the block, with the first oil and gas production likely in 2028. The block’s Gran Morgu field holds an estimated 750 million barrels of oil and will start production on a floating production ship (FPSO).

Suriname is waiting for Malaysia’s Petronas to make a decision about Block 52, also offshore. Petronas has made three discoveries on the block, which holds more than 400 million barrels of oil.

In a statement in October, Moody’s reported that it expects “the start of the oil production to lead to a period of very high growth rates, and government revenue from the project to be very large relative to its debt stock and gross financing needs.”

Minister Raghoebarsing says the key going forward is management.

“We need to build capacity to manage the economy. We have to insulate management of oil wealth from political influence so that it is operates in a strictly business environment,” he said.

Counsel to the Republic of Suriname: White & Case

Counsel to Bondholders: Orrick

Financial Advisor to Bondholders: Newstate Partners

Financial Advisor: Lazard

Creditors: Paris Club, India, China, Bondholders and other commercial creditors

All supporting financial institutions and law firms were transmitted to LatinFinance by the award category winners. For updates please email awards@latinfinance.com

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