AXA XL, the property & casualty (P&C) and specialty risk division of global insurer AXA, is providing $30 million in insurance to the Bahamas conservation debt swap, which aims to unlock $124 million for ocean protection.
In a bold move to prioritise marine conservation and address climate change, the Bahamas has unveiled plans to refinance $300 million of its external debt.
This will result in the liberation of over $120 million, which will be dedicated to critical marine conservation initiatives and climate change mitigation efforts.
To achieve this, the plan involves to spend $215.7 million to buy back Eurobonds and repurchasing an $81 million commercial bank loan using the lower-cost $300 million loan from Standard Chartered.
Debt-for-nature swaps are gaining prominence as a pivotal tool to help countries achieve their conservation and climate objectives.
This is considered the fifth such debt-for-nature swap in the world. Parties involved include the Bahamian government, The Nature Conservancy, the Inter-American Development Bank, as well as other financial partners.
These swaps aim to bridge the substantial $942 billion nature finance gap, as estimated by BloombergNEF, which is necessary for the global restoration and preservation of biodiversity.
The Bahamas deal is considered the first new generation debt swap involving guarantees and private sector insurance. Builders Vision, an impact investor, has provided a credit guarantee of $70 million, while Axa XL has offered $30 million in insurance.
The Inter-American Development Bank (IDB) provided a $200 million partial credit guarantee for the debt swap. This enabled Standard Charted to set the interest rate for its 15-year loan at 4.7%, a rate that the bank aligned with the cost of new IDB debt.
With the $124 million that have been unlocked from this move, the Bahamas will be able to support marine conservation projects for the next 15 years and channer the savings into restoring mangroves, expanding marine protected areas, and safeguarding its oceanic habitats.
To ensure continued funding for the projects beyond the initial 15-year period, an endowment fund will be established. Notably, the Bahamas currently has approximately $5.7 billion in outstanding external debt.
