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Bear Stearns downgrades Jamaican bonds
Dean is not a significant credit event for Jamaica
Friday, August 24, 2007
US Investment bank, Bear Stearns (Bear Stearns is not a rating agency) has downgraded its outlook on the performance of Jamaica's Bonds to Under-perform from Market-perform.
According to the investment bank, "Hurricane Dean was destructive but not devastating." The bank does not believe that this hurricane represents a meaningful credit event for Jamaica. Bond prices during Hurricane Ivan in 2004 fell by about one point before recovering quickly. Bear expects the price reaction to be similarly muted this time around.
Bear went on to further highlight that Hurricane Dean passed just south of Jamaica as a category 4 hurricane. The effects of the storm were mitigated by the fact that the storm veered slightly south of its projected path, the eye missing the mainland of Jamaica. In addition, disaster preparedness seems to have improved substantially in recent years. For example, the power grid was shut down before the worst onslaught of the storm, which probably mitigated damage to the grid.
"The area around the capital Kingston was hard hit, but there have been no reports of fatalities. Damage has been related to the usual flooding and minor structural damage. Power supply is being restored very sporadically, and many businesses will be closed, potentially for a few days."
The tourist area of Montego Bay was spared the worst of the storm, with minor damage to hotel properties that should result in very little business disruption, according to hotel contacts we (Bear Stearns) spoke with. "Preliminary estimates for insured losses from the Lesser Antilles islands to Jamaica range from US$1.5-US$3.0 billion (some 70%-90% of which is in Jamaica). These numbers are estimates and could change as more information becomes available. Insured loss estimates include wind damage to commercial and residential properties and business interruption due to property damage; excluded are losses related to flooding, Bear noted.
The Government of Jamaica has received assurances of aid from several governments, including the US We have learned that the storm was not severe enough to qualify Jamaica to draw funds from the Caribbean Catastrophe Risk Insurance Facility, which is in its first year of operation.
"Jamaica has an amortisation of US$225 million due on September 1. Although Jamaica would have liked to have accessed the markets to refinance this maturity, it has not been able to due to market turmoil in recent weeks. However, based on similar past experience, the level of foreign exchange reserves at the Bank of Jamaica, and the country's demonstrated willingness to pay, we do not foresee any risk that this maturity will not be paid on time," the investment bank stated.
Dean is not a significant credit event for Jamaica
Friday, August 24, 2007
US Investment bank, Bear Stearns (Bear Stearns is not a rating agency) has downgraded its outlook on the performance of Jamaica's Bonds to Under-perform from Market-perform.
According to the investment bank, "Hurricane Dean was destructive but not devastating." The bank does not believe that this hurricane represents a meaningful credit event for Jamaica. Bond prices during Hurricane Ivan in 2004 fell by about one point before recovering quickly. Bear expects the price reaction to be similarly muted this time around.
Bear went on to further highlight that Hurricane Dean passed just south of Jamaica as a category 4 hurricane. The effects of the storm were mitigated by the fact that the storm veered slightly south of its projected path, the eye missing the mainland of Jamaica. In addition, disaster preparedness seems to have improved substantially in recent years. For example, the power grid was shut down before the worst onslaught of the storm, which probably mitigated damage to the grid.
"The area around the capital Kingston was hard hit, but there have been no reports of fatalities. Damage has been related to the usual flooding and minor structural damage. Power supply is being restored very sporadically, and many businesses will be closed, potentially for a few days."
The tourist area of Montego Bay was spared the worst of the storm, with minor damage to hotel properties that should result in very little business disruption, according to hotel contacts we (Bear Stearns) spoke with. "Preliminary estimates for insured losses from the Lesser Antilles islands to Jamaica range from US$1.5-US$3.0 billion (some 70%-90% of which is in Jamaica). These numbers are estimates and could change as more information becomes available. Insured loss estimates include wind damage to commercial and residential properties and business interruption due to property damage; excluded are losses related to flooding, Bear noted.
The Government of Jamaica has received assurances of aid from several governments, including the US We have learned that the storm was not severe enough to qualify Jamaica to draw funds from the Caribbean Catastrophe Risk Insurance Facility, which is in its first year of operation.
"Jamaica has an amortisation of US$225 million due on September 1. Although Jamaica would have liked to have accessed the markets to refinance this maturity, it has not been able to due to market turmoil in recent weeks. However, based on similar past experience, the level of foreign exchange reserves at the Bank of Jamaica, and the country's demonstrated willingness to pay, we do not foresee any risk that this maturity will not be paid on time," the investment bank stated.
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