Required: The following are two newspaper articles relating to debt restructuring in the Caribbean. Read both articles and respond to all the questions which follow. Barbados creditors gear up for likely debt restructuring July 6, 2018 | Aaron Weinman A group of the island's creditors has hired advisors to negotiate with the government BondsCapital MarketsDebtBarbados

Barbados' creditors are gearing up for debt restructuring talks as the government advances discussions with the IMF over a potential financing package. Newly-elected Prime Minister Mia Mottley and her administration, along with financial advisors White Oak, are expected to continue meetings with domestic creditors and their advisors over the next few weeks, a source familiar with the proceedings has said. "Creditors have shown an understanding for the Government's resolve to place the public finances on a sustainable footing, but a lot hinges on whether the Caribbean island can secure funding from the IMF," the source said on Thursday. An agreement-in-principal with the multilateral agency could surface as soon as this August ahead of a signed pact in September. Barbados' external creditors could face up to a 50% nominal haircut in the event of a restructuring, according to Stuart Culverhouse, head of research at Exotix. He said in an emailed note that there were similar 50% cuts in other Caribbean islands such as Grenada and St. Kitts and Nevis. He also expects the restructuring to focus on cash flow because external commercial debt was only 10% of public debt and 17% of GDP. Barbados' bonds were hovering around 55 cents on the dollar on Thursday afternoon, according to a second buyside source. Given the majority of Bajan bond debt is held by domestic and regional creditors, the second source said external bondholders may argue that the domestic side should be most impacted by a haircut. "External debt is a small part of their total," he said. "But on the domestic side, I doubt you'll see a haircut." On June 1, Barbados said it would suspend all external debt payments and try roll over domestic liabilities. The sovereign has since missed about $12m in payments across its 6.625% 2035s on June 5 and a June 15 payment on its 7.25% 21s. The next coupon payment is August 4 on the island's 7% 2022 securities. Barbados has $150m outstanding in 21s, $200m in 2022s and $195m in 2035s. These bonds have fallen from the low 90 cent range. In May, Mottley's center-left Barbados Labor Party (BLP) won all 30 seats in the government's House of Assembly. Since 2010, St. Kitts and Nevis, Antigua and Barbuda, Grenada and Jamaica have had to default and restructure debt. Barbados has not tapped international bond markets since 2013. Source: https://www.latinfinance.com/daily-briefs/2018/7/6/barbados-creditors-gear-up-for-likely-debt-restructuring Retrieved: August 7, 2018 Markets | Thu Aug 27, 2015 3:34pm EDT Related: BONDS, MARKETS, FINANCIALS Grenada will wrap up debt deal soon: IMF BY PAUL KILBY NEW YORK, Aug 27 (IFR) - Grenada is expected to conclude its debt restructuring in a matter of weeks, the International Monetary Fund said on Thursday following a recent visit to the country. Under the April deal, bond creditors agreed to a 50% haircut and special warrants on some US$262m of international and local bonds related to the island's citizenship-by-investment program. Bondholders exchange their current holdings - securities on which the country defaulted in 2013 - for new 15-year amortizing bonds with a 7% coupon. "It will be important to finalize this agreement promptly so as to clear uncertainty regarding financing and unleash confidence and investment," the IMF said. It said the restructuring - which gives Grenada debt relief worth 19% of its GDP - would be completed in the coming weeks. The deal is a much-needed reprieve for a country burdened with total public sector debt that reached 111% of GDP in 2014, according to IMF estimates. "Grenada is making solid progress implementing its homegrown economic program, restoring fiscal sustainability and laying the groundwork for stronger growth," the IMF said. The Fund is now forecasting 3.1% growth this year, compared to the 1.7% it had calculated earlier this year. The island nation defaulted on a US$193m 2025 international bond issue - and on local bonds with the same maturity - in 2013 in the wake of a series of hurricanes and the financial crisis. (Reporting By Paul Kilby and Krista Hughes; Editing by Marc Carnegie) Source: https://www.reuters.com/article/markets-emerging-latam-idUSL5N11256E20150827 Retrieved August 7, 2018

1. What are the key features of a plain vanilla bond? (At least 3 will do) 2. Briefly discuss three of the risks associated with debt restructuring of a country. 3. Explain three (3) major factors (external and otherwise) which lead to debt restructuring operations in small island states in the Caribbean. 4. Assume you are a current holder in one of those government bonds how would you respond to these announcements? 5. Assume you are a representative of the government; present a plan to the Steering Committee of the Bondholders of Grenada, which would not erode investor confidence in existing and future debt securities issued by the Government of Grenada. You plan should outline the issues facing the government and how you plan to do the haircut. 6. Name at least three other countries within the Caribbean which have within the last 10 years undertaken sovereign debt restructuring and give a brief description of the nature of their restructuring exercise. 7. Describe how successful those programs (mentioned in 6 above) were and how they have helped the countrys overall debt position. 8. How do you think the IMF assistance will contribute to the overall success of the Barbados program? Comment on its role in such an exercise. 9. Explain in financial terms the following sentence, Barbados' external creditors could face up to a 50% nominal haircut in the event of a restructuring, according to Stuart Culverhouse, head of research at Exotix. 10. Paragraph 3 in the Barbados article reads "Creditors have shown an understanding for the Government's resolve to place the public finances on a sustainable footing, but a lot hinges on whether the Caribbean island can secure funding from the IMF." What if you are the current Prime Minister, and the country doesnt receive the necessary funding from the IMF, or the funds received will not place the countrys debt on a sustainable path, what would you do as Prime Minister? In no more than 400 words, draft a response in the context of the Barbados situation which will assist the country in getting back to a sustainable path.