On Mar 28, 2013 the National Commercial Bank reported its participation in a private debt exchange, organized subsequent to the publicly announced National Debt Exchange to plug an additional estimated J$25 billion shortfall in funds needed to reduce the government’s debt bill. This Private Debt Exchange (called in some circles as NDX2) was done with some of the major holders of government securities.
NCB reported that;
National Commercial Bank Jamaica Limited and its subsidiaries exchanged in aggregate approximately J$7 billion of Government of Jamaica securities in the private debt exchange. The securities were exchanged for other securities with lower coupons and different maturity dates.
The company expects an adverse impact during the current financial year (ending September 30, 2013) on the company gains on foreign currency and investment activities, and interest income from securities held. Given that the coupons on the securities offered were higher than those on the securities received after the exchange, if the company continues to hold the securities received, the interest earned on them would continue to be lower until those securities mature. There may, therefore, continue to be an impact on the interest earned in future years, though there are greater uncertainties around predicting the impact that will be experienced in the future years. Of course, this does not take into account the positive impact of mitigating measures and the overall impact of the change in the environment which has happened, and is still happening, in the context of the NDX and the recent private exchange. We do not anticipate that there would be any material impact on capital.