First-of-a-kind ocean debt swap proves huge success

Innovative deal structure can now hit the capital markets with benchmark blue bonds

A pioneering $21.6m (€19.3m) sovereign debt restructuring deal to finance marine conservation in the Seychelles has met its impact targets with a third of the Seychelles’ ocean now designated as ’protected’.

The Nature Conservancy, who structured the deal through its NatureVest arm, says more are now in the pipeline in Africa and the Caribbean in the range of $200m-$500m (€178.5m – €446.3m).

In a world first, the Seychelles deal saw the Nature Conservancy raise $15.2m in impact capital loans and $5m in charitable grants to buy back $21.6m of the country’s sovereign debt from creditors in 2016.

The renegotiated terms with the Seychelles government included marine conservation and climate adaptation measures that have now been met, with 32% of its waters designated as Marine Protection Areas.

The country's president, Danny Faure said: “Seychelles is ultimately an Oceanic State and our people are connected to the ocean. By protecting these large areas we are not only safeguarding our marine environment but balancing economic growth through the management of the resources that the sea provides. We realise we are not the only island nation that faces these challenges. We are proud of this accomplishment and hope that other nations will follow suit.”

Rob Weary, Deputy Managing Director of Blue Bonds at Naturevest, told RI that it was working on 20 similar deals. He said the most advanced were a $500m deal in Africa and a $200m deal in the Caribbean. “We’ve definitely figured out how to scale these up,” he said.

He continued that as Naturevest was now able to get credit enhancement from the US Development Finance Corporation, it could raise finance on the capital markets. “We are going to be issuing blue bonds for future deals,” he said.

Designating 30% of its marine area as protected means Seychelles has already tripled the UN Convention of Biological Diversity Target 11 for 10% marine protection by 2020, and the UN Sustainable Development Goal SDG-14 for 10% coastal and marine protection.

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