Clifford Chance advises Standard Chartered on conservation linked debt conversion for The Bahamas

Clifford Chance advises Standard Chartered on conservation linked debt conversion for The Bahamas

Global law firm Clifford Chance has advised Standard Chartered on an innovative debt conversion transaction for the Commonwealth of The Bahamas.

The transaction involved Standard Chartered providing a US Dollar term facility (Facility) to the island nation. The Facility benefits from a partial credit guarantee from the Inter-American Development Bank (IDB), a collateralised partial credit guarantee from Builders Vision, and an excess of loss credit insurance policy by AXA. The Bahamas used the proceeds to buy back certain international bonds in the market, as well as prepaying certain loan obligations.

The credit enhancement allowed for favourable terms on the new loan compared to the repurchased debt and is expected to generate an estimated US$124 million of savings, which will be used for marine conservation over the next 15 years in The Bahamas.

The Nature Conservancy (TNC) provided advisory services on the transaction including the co-development of conservation commitments to be completed during project implementation and mobilized the credit enhancers' participation. Conservation funding generated by the debt conversion will be managed by The Bahamas Protected Areas Fund (BPAF). The Bahamas' conservation commitments include developing and implementing climate-smart Marine Protected Area management plans, a National Mangrove Management Plan, and a Marine Spatial Plan aimed at addressing increasing demands for use of The Bahamas' ocean using a transparent, participatory and science-based process.

Notable components of the transaction include that it engaged credit from both private and multilateral sources in one deal, demonstrating the increasing mobilization of private capital to address climate transition funding. In addition, owing to the structure and geographic scope of the transaction, it incorporates a recent development in debt sustainability, by including an option to temporarily suspend debt servicing in case of a future pandemic or following the occurrence of a range of natural disasters.

The successful execution of the deal adds to Clifford Chance's 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 recently advised on similar transactions for El Salvador, the Republic of Ecuador and Barbados, among others.

Partner Deborah Zandstra, who led on the transaction, said "We are delighted to have worked on this transaction, which harnesses debt conversion techniques and blended finance to support conservation objectives for The Bahamas".

Deborah was assisted by a core, cross border team of Jon Zonis, Azam Taiyeb, Andrés Berry, Lucia Ferrer, Domenico Cullura, Alexandra Machado, Adele Irwin, David Rondon and trainees Hannah McLellan and Kaneeka Kapur.