When Future Oil Wealth And Current Debt Collide

Suriname’s future oil wealth has reared up to bite it as it tries to restructure $675 million in defaulted bonds, Suriname’s Ministry of Finance said in a statement this week.

Suriname’s restructuring offer made by the Ministry of Finance was rejected by five creditors this month, as the country tries to find a solution to its default. What may have otherwise been an acceptable offer, however, is looking less attractive to creditors, who are eyeing future oil royalties from mouthwatering oil riches that could soon be exploited, Bloomberg has reported.”

Suriname’s offshore territory is just across the border from Guyana’s offshore area that has been home to a flurry of oil finds over the last two years—the likes of which the world hasn’t seen in years.

And Suriname’s creditors are holding off on accepting an offer pending FID from Apache Corp.

Suriname began struggling to service its debt during the Covid crisis. Suriname has argued that a fair deal should be struck based on their current situation, but that the country would be amenable “to compensating the creditors in the near future, should the country receive offshore oil money.”

Suriname’s 2023 notes are near 81 cents on the dollar, while those due in 2026 have been at 71 cents on the dollar for months, according to Bloomberg calculations.

A fixed-income instrument that is tied to oil royalties could make up any restructuring shortfall to bondholders. Negotiations, however, have led to a disagreement on how Suriname’s first oil royalties are allocated. Suriname is expecting the first $500 million, but investors want Suriname to start sharing the wealth after the first $50 million. 

By Julianne Geiger for Oilprice.com

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