(Bloomberg) — When Barbados wrapped up a novel debt swap earlier this month, one party was notably absent: UBS Group AG.
The Swiss bank, which had been part of a consortium working on the $300 million deal to refinance debt for the Caribbean nation, ended up not participating in the transaction after the UBS manager who had specialized in such swaps left, according to people familiar with the matter who asked not to be identified discussing private talks.
The swap was arranged by a local unit of Canadian Imperial Bank of Commerce and backed by two multilateral lenders. UBS is now exploring a smaller role in the structure — a possible $50 million tranche — which may be negotiated in the new year, the people said.
A spokesperson for UBS declined to comment.
The transaction, which would have been UBS’s first foray into a market that bankers and environmental activists alike say is poised for significant growth, is intended to generate savings for Barbados to improve its water and sewage systems.
UBS’s initial involvement in the Barbados deal had been overseen by Ramzi Issa, a former Credit Suisse manager who in 2021 helped pioneer the introduction of such swaps to institutional investors. After UBS took over Credit Suisse last year, it made Issa head of global structured credit and sustainable credit products. Bloomberg reported last month that Issa has left the Swiss bank.
Without Issa, UBS’s role in the transaction was diminished, the people familiar with the matter said. What’s more, it was decided to limit the buyback to Barbados’s local-currency debt, reducing its appeal to global banks like UBS that don’t have local operations, said the people.
Issa didn’t respond to a request for comment.
Such deals — often called debt-for-nature swaps — are designed to help countries refinance their obligations at better terms and allocate savings to environmental or social goals. After being dominated by Credit Suisse in its early days, the market has attracted an increasing number of global banks drawn by the promise of attractive fees associated with complex and bespoke financial structures.
The deal negotiated for Barbados provides the country with $300 million of guarantees, evenly split across the European Investment Bank and the Inter-American Development Bank. Barbados has used the guarantees to back the equivalent amount in local currency loans.
Banks to have completed similar debt swaps in recent months include JPMorgan Chase & Co., Bank of America Corp. and Standard Chartered Plc.
UBS’s cautious approach fits with its general dialing back of risk as part of its integration of its former rival. Executives have drastically reduced the size of the investment-banking balance sheet being brought over from Credit Suisse, and the combined unit will be more explicitly aimed at serving the needs of its wealth-management clients.
At the same time, lawyers at UBS have been urging caution around some of the terminology related to climate and environmental finance, specifically listing nomenclature around debt-for-nature swaps as a risk, Bloomberg reported in October.
–With assistance from Jeff Black.
©2024 Bloomberg L.P.
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