Cuba has rolled over 200 million euros in bond issues that were due in May, as the country's central bank asked for another year to repay foreign holders of the debt, financial sources in London and Havana said this week.

Tue Jun 9, 2009 9:56pm IST

* 200 million in euro bonds due in May rolled over

* Bond holders accepted extension to May 2010

* Issue was subscribed 15 pct by foreign banks, entities

By Marc Frank

HAVANA, June 9 (Reuters) - Cuba has rolled over 200 million euros in bond issues that were due in May, as the country's central bank asked for another year to repay foreign holders of the debt, financial sources in London and Havana said this week.

The move is yet another sign the Communist-run nation is suffering a cash crisis, as it struggles with sharp declines in revenues from tourism and key exports due to the global economic crisis.

The two-year euro-denominated bonds of 150 million euros and 50 million euros that were rolled over were issued on the London Stock Exchange on May 3, 2007, at interest rates of 9 percent and 8.5 percent respectively. They were held mostly by Cuban entities, though some foreign banks with a history of providing credit to the island also participated.


"Apparently the Cuban Central Bank asked one more year for repayment to these foreign entities," a European diplomat said. The statement was confirmed by one of the non-Cuban debt holders, who spoke on condition of anonymity.

"The issue with maturity in 2009 had been subscribed 85 percent by Cuban banks and 15 percent by foreign banks and entities," the diplomat said.

Stuart Culverhouse, chief economist at London-based brokerage firm Exotix, which trades in exotic debt such as Cuba's, said there was apparently a high participation rate in the rollover by the bondholders.

"Cuba had been talking to holders in advance to negotiate rollover and was believed to have achieved a high rate of participation before the maturity date, but the exact terms are not clear," Culverhouse said.

When Cuba issued its first global debt issue in decades -- a one-year, 400 million euro ($524 million) bond that was paid off in February 2007 -- former Central Bank President Francisco Soberon said it was evidence of the increasing confidence of international financial markets in "the honesty and seriousness of the Cuban government."

But there are increasing signs now that Cuba's finances face severe strains. Foreign businesses have had difficulty this year transferring funds abroad from their accounts in Cuba or even making significant withdrawals.
http://in.reuters.com/article/2009/06/09/cuba-finance-bonds-idINN0936980220090609