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Bahamas unlocks $124 million to fund ocean protection

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Debt swap backed by $300 million loan from Standard

Chartered ( SCBFF )

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Money to fund ocean and mangrove conservation

By Virginia Furness

LONDON, Nov 22 (Reuters) - The Bahamas has unlocked more

than $120 million to fund the conservation and management of its

oceans and mangroves with a debt swap financed by Standard

Chartered ( SCBFF ) and backed by the private sector.

By spending $215.7 million to buy back Eurobonds and

repurchasing an $81 million commercial bank loan using a

lower-cost $300 million loan from Standard Chartered ( SCBFF ),

the Bahamas is able to redeploy the interest and principle

payment savings to fund wide-reaching ocean conversation

projects.

So-called debt for nature swaps are emerging as an important

tool to help countries achieve their conservation and climate

goals and close the $942 billion nature finance gap BloombergNEF

estimates is needed to restore and maintain biodiversity

globally.

The swap comes after nations at a UN biodiversity summit in

Colombia in October failed to devise a plan for how countries

would reach the ambitious global goals for mobilizing billions

of dollars for nature conservation. Rich nations signalled an

unwillingness to pay more, instead looking for the private

sector to fill the gap.

"The nature bonds programme is one of the few mechanisms

that can drive financing at scale towards climate and nature in

the global south," said Slav Gatchev, head of sustainable debt

at The Nature Conservancy, which designed the deal and provides

conservation support to the Bahamas.

The Bahamas' unique archipelago of low lying islands, coral

islets and cays make it and the people who live there highly

vulnerable to climate impacts. The country is still feeling the

effects after Hurricane Dorian left widespread devastation in

2019.

The Bahamas deal is the first new generation debt swap to

involve guarantees and insurance from the private sector with

Builders Vision, an impact investor, putting up a $70 million

credit guarantee and Axa XL providing $30 million insurance.

The deal enhancements, along with a $200 million partial

credit guarantee from the Inter-American Development Bank (IDB),

enabled Standard Charted to price its 15-year loan at 4.7%, a

coupon the bank said was roughly aligned to the cost of new IDB

debt.

"The asset class is not only scaling but developing," said

Dennis Eisele, head of global credit market financing for Latin

America at Standard Chartered ( SCBFF ).

"Builders Vision and AXA demonstrate there is an expanded

pool of capital for these deals."

Eisele said the bank has no immediate plans to sell on the

loan.

At their simplest, debt for nature swaps see part of a

country's debt bought up by a bank or specialist investor and

replaced, usually helped by a credit guarantee, with a new

lower-cost "nature" bond or loan.

Funding from the Bahamas swap will go towards restoring

mangroves damaged by the hurricane, managing the archipelago's

6.8 million hectares of marine protected areas and supporting

the build out of a new project to protect the entire Bahamian

ocean area.