LONDON – A creditor group formed to negotiate with Cuba over defaulted debt has already started talks with Havana, its newly appointed coordinator said, warning of a need to speed up the process.
The ad hoc committee holds obligations representing $1.2 billion worth of Cuban debt and includes three funds — Stancroft Trust, Adelante Exotic Debt Fund and CRFI Ltd — according to Rodrigo Olivares-Caminal, a law professor at London’s Queen Mary University.
Their holdings amount to about 40 percent of Cuba’s private-sector debt, plus interest, according to Olivares-Caminal, a sovereign-debt restructuring expert who was appointed to the committee earlier this month.
“We are opening the process now … aiming at starting meaningful discussions,” Olivares-Caminal said. He has been in touch with the stakeholders and the Cuban government, he said.
The debt mainly pertains to development loans taken out from private, non-U.S. banks in the 1970s and 1980s, before a 1986 default by the island’s Communist government.
Stancroft and funds like it bought the paper for as little as 1.5 cents on the dollar. Stancroft has held the paper for more than a decade.
Investors have been buying up Cuban’s defaulted debt since last year’s breakthrough in U.S.-Cuba relations. Brokers say is now quoted at 30-odd cents on the dollar for high-quality, hard-currency-denominated loans, albeit in an illiquid market. The debt traded at 25 to 30 cents a year ago.
Olivares-Caminal declined to comment on potential recovery values. He said he was collating data on how much debt is out there and hopes to enrol more creditors on the committee.
He said he was in touch with the International Monetary Fund (IMF), the Paris Club of sovereign creditors and the Institute of InternationaL Finance, a global financial industry body.
Cuba has already reached agreements with Russia, France and Spain on debt forgiveness. In December creditor nations from the Paris Club agreed to forgive $8.5 billion of debt. In total, Havana is estimated to have restructured some $50 billion in old debt in the past few years.
Meanwhile, politics and economics make it imperative to move swiftly, Olivares-Caminal cautioned.
Barack Obama recently became the first U.S. president to visit Cuba in 88 years, but his term ends in January. Republican presidential candidate Donald Trump has said he also will normalise Cuba ties, but the Republican-controlled U.S. Congress has steadfastly refused to lift a decades-old embargo.
There could be hurdles from the Cuban side too: recent Communist Party elections named old-guard members to head it for five more years and signalled economic reforms would not be rushed.
But clearing existing debt is seen as crucial if Cuba is to borrow again for infrastructure projects.
“Cuba needs the money and they need to clear this hurdle,” Olivares-Caminal said. “The creditors are not just looking for returns, they are keen to build a relationship and to help the country.