LatAmOil: Suriname avoids default by pledging to share future oil profits

After three years of talks with holders of $675mn of its foreign currency-denominated bonds, Suriname has struck an agreement with investors in order to avoid default. Under the new deal, the South American country will see a portion of its sovereign debt forgiven in exchange for providing bondholders with a cut of its future oil profits.

The deal calls for the government to provide annual oil royalties of 30%, on the condition that Suriname receives a minimum of $100mn in royalties. In return, the bondholders have agreed to accept a 25% loss on their bond holdings.

Analysts have hailed Suriname’s new deal as a precedent for other states that are looking for debt relief. For the majority of this century so far, such deals have been declining in popularity as bondholders see that governments tend to end up paying less than what was initially expected.