Cuba has insisted it is willing to talk to “legitimate” creditors about repayment of billions of dollars of Fidel Castro-era foreign debt, even as its communist government seeks to reject a claim by the Cayman Islands. Fighting in the High Court in London – Registered Fund.
Private-sector bondholders, who owe an estimated $7 billion in unpaid Cuban debt dating back to at least the 1980s plus interest, say Havana has blocked their offers for talks for years.
But two Cuban ministers indicated a willingness to engage with creditors in rare interviews with the Financial Times as Havana seeks to extricate itself from its worst economic crisis in decades.
“The position of our country is that we recognize our legitimate debts [and] our legitimate creditors. Our position is first of all to recognize them, be transparent, always talk with our creditors and seek mutually favorable terms to honor these obligations,” said Justice Minister Oscar Manuel Silver.
Havana struck a deal with the Paris Club of creditor nations in 2015 to write off more than three-quarters of the debt, but no such agreement has been reached with the private sector.
International investors will be eyeing a restructuring deal with private creditors as a precondition for the Caribbean nation gaining access to bond markets to help finance its cash-strapped economy after a decade-long absence.
Cuban debt is barely traded on secondary markets due to a lack of demand, and Washington’s embargo against the Caribbean island prevents US money and US citizens from buying it. When it trades, it receives less than 10 cents on the dollar.
However, Havana’s immediate challenge is to resolve its legal battle with the Caymans-incorporated CRF Eye Fund. The government is resisting an attempt by the fund to pursue it for €72mn of debt and interest.
If successful, I claim the CRF could ease the way for other private sector creditors to litigate.
CRF I is seeking to enforce claims in its name on two tranches of Cuban debt owed in the mid-1980s. Cuba has claimed that the CRF obtained the loans illegally because specific legal conditions required for their validity were not met. It also claimed that the CRF used bribery.
“CRF is not and never has been our creditor because they did not legitimately obtain this loan,” Silver said. “We believe that there was a proven case of corruption in this area.”
A former official of the state-owned Banco Nacional de Cuba testified in court in London by video from 13 years in prison in Cuba for his role in the case and “clearly exposed how these tragic events unfolded”. “, Silver said.
CRF president David Charters said he had tried repeatedly with the Cuban people to negotiate a mutually beneficial debt restructuring. “We’ve put some pretty imaginative suggestions on the table,” he told the FT. “But he either completely ignored [the] proposals or simply rejected them out of hand.
The CRF has denied the allegations of bribery. Its lawyers argued in court in London that Cuba withdrew them from their legal case just before proceedings began, in what they described as “a belated recognition that extremely serious allegations have been made . . . baseless.” were and should never have been made”.
However, Oliver said that Cuba “did not ask the British judge to prove that there was corruption . . . because it had already been proven in Cuba.”
John Kavulich, head of the US-Cuba Trade and Economic Council, a private non-profit group, said the London trial “means far more than most people appreciate”.
“What this lawsuit and the lawsuit have done is focus on how much Cuba is owed, that they don’t pay what they owe and are fighting to get paid what they do. . . From a marketing point of view, it’s a disaster”.
Cuba’s first deputy finance minister, Vladimir Regueiro, who was also in London for the court hearing, told the FT that Havana would always negotiate with creditors “to seek the best terms and conditions in line with the current conditions in our economy”. was ready to “those who legitimately hold the title”.
CRF is part of a creditor group that owes Cuba $1.4bn in debt, which it described as a “very beneficial” restructuring proposal for Cuba in 2018, but has not heard back from Havana. The group included two other funds, Stancroft Trust and Adelante Exotic Debt.
Reguero said the coronavirus pandemic projected an 11 percent drop in Cuba’s gross domestic product in 2020. Growth has been sluggish since then, while annual inflation is running at around 40 percent.
At the same time, the “unprecedented” tightening of US economic sanctions against Cuba under the Trump administration had severely hit the economy, Regueiro said.
“Nevertheless, there have been important talks at the level of companies, institutions, reaffirming the position of recognizing the debts of our government [and] directly between banks. , , And also with the government, with other sovereign governments”, he said.
CRF began taking positions in Cuban debt from 2009, buying in hopes of making a profit on future restructuring.
“They’ve accused us of being vultures, but if we want to be aggressive, we can litigate the entire portfolio,” Charters said. “We could have pulled out $1.3bn comprehensively and we didn’t.”
The CRF had suggested to Cuba to negotiate cash for the two pieces of the loan on the issue of a large reduction in dues and money to come from payments from surcharges on incoming cruise ships or airliners.
A decision is expected in about three months but the losing side can appeal to a higher court.