Not good!

Sagicor upgrade not a positive signal for Barbados – Straughn

Economist Ryan Straughn is warning that the recent upgrade by Standard & Poor’s (S&P) of Sagicor Finance (2015) Ltd by two notches could spell more bad news for Barbados.

Last Friday’s upgrade of Sagicor’s US$320 million seven-year senior unsecured notes to “BB-” from “B” came on the heels of a decision taken by the regional insurance and financial trading giant to move its headquarters from Barbados to Bermuda last June.

The shift came against a backdrop of Barbados suffering multiple downgrades at the hands of S&P, which Sagicor officials said had negatively affected the company’s international operations.

Straughn, who is a former president of the Barbados Economic Society, is therefore concerned that given the positive effect of Sagicor’s relocation on its international rating, other companies may opt to follow suit, in terms of packing up and leaving the island.

In any case, he said while the latest update by S&P may be a positive thing for shareholders and policyholders in the insurance company, it was certainly not a good signal Barbados.

In fact, Straughn, who is the Opposition Barbados Labour Party’s candidate for Christ Church East Central, said the unequivocal message that had been sent was that “all is not well at all” on the island.
“It [the S&P upgrade] is good for Sagicor and Sagicor policyholders, but I think that when we reflect on the impact that it has on the business environment in Barbados in particular, and as taxpayers, it is of some concern,” said Straughn, who is also a former Central Bank economist.

“If companies have to re-domicile, or relocate, in order to have good access to capital markets, then that suggests that the financial markets in Barbados may be under some strain, which only reflects the poor fiscal management that has been undertaken so far, and coupled with the very poor monetary policy implementation by the Central Bank [of Barbados],” he said.

However, Straughn does not expect any mass exodus of companies at this stage, even though he said the Sagicor news, when combined with the Guyana Central Bank’s recent decision to put a temporary freeze on its trade in Barbados currency could only spell more trouble ahead.

“From a business standpoint, if we don’t change both our monetary and fiscal policy, I think that is something that ought to be of concern because there are people, [Barbadian] business who operate in Guyana, and if that trend continues across the rest of the Caribbean, I think that could have the potential for a large impact,” he said.

8 Responses to Not good!

  1. Hal Austin December 30, 2016 at 9:05 am

    This is a strange analysis, since the the alisting in London and decusion to move from the leading financil market inwcredit rating of a company is often, but not necessarily, linked to the credit rating of the country of domiciled.
    If that was the case, then there will be no global company located in developing countries. They will all rush for listings in developed countries, specifically London or New York.
    There are question to be asked of Sagicor, dating from the days of its de-mutualisation to listing in London and the subsequent move to Bermuda. It is one for our financial analysts, economists and journalists. I am still of the view that we took our eyes off the ball and concentrated on politics, rather than financial economics.
    Whatever happened to the dormant accounts? Whatever happened to the with-profits funds? Were the owners, the policyholders, paid out, or did they ‘pay’ the new owners to take over the company?
    It is also time that the central bank made public its methodologies, similarly to leading central banks, so we can mimic their predictions and policies, especially its growth predictions.
    The S&P rating of Sagicor will have very little bearing on the ‘big’ companies listed on the Barbados stock exchange, which is so influential the local papers do not even report on its activities.
    What about BHL? Why is it we are told the company is now doing so well when it failed under local ownership? How do we explain that, apart from slick PR? Smoke and mirrors?

    Reply
  2. steel donkey December 30, 2016 at 9:59 am

    I knew I smelt a rat. And it is rotting. Here it comes.

    Reply
  3. Peter December 30, 2016 at 10:09 am

    Hal, Mr. Straughn did not say it directly, but if I am to understand what he means, is simply that Sagicor’s move reflects non confidence in this current Barbadian domain. This will no doubt present a strong area of doubt among investors who may have been looking at using Barbados as one of their enterprise strongholds. I, personally as a Business Development professional cannot honestly recommend Barbados as an offshore domain for many business and operational reasons. Lots of wealthy individuals and companies are registering their companies outside od the UK because od the fall in the exchange rate for the Pound Sterling. A similar thing is happening to the BDS dollar. It will soon not be accepted first regionally . as Barbadians are buying up US $ and Guyana dollars which incidentally is easy to exchange for US dollars in Guyana. Gold and precious gems are now a lucrative trading commodity. Actually that is what is keeping Venezuela somewhat afloat. Investors are watching Barbados. We’ll see. Mr. Straughn speaks well and he knows what he is saying. Both Sinckler and the Central Bank Governor are way out of their league.

    Reply
  4. jrsmith December 30, 2016 at 11:09 am

    All we hear is talk ,talk, talk, why should people listen to people who 8 years ago as financiers , economists and bankers , couldn’t see what the hell they were all doing to the world economy , which is still being felt today…
    Sagicor move from Barbados is simple to avoid taxes ………
    why didn’t they go to Trinidad, Jamaica , Antigua , ST Lucia ..

    Reply
  5. Hal Austin December 30, 2016 at 11:35 am

    Peter,
    I got it first time. What I have pointed out is that the credit rating of a publicly listed company does not necessarily depend on the credit rating of the government.
    If that was the case there will be no multinationals domiciled in developing countries.
    Remember that according to the jokers at the WTO China, the second largest and to many of us, myself included, the leading economy in the world, is still a developing economy; South Korea is also listed as developing, while Canada, is listed at a leading developed economy and so is New Zealand, with its population of sheep farmers.
    Why did Sagicor opt for Bermuda instead of London or New York?
    I m not convinced.

    Reply
  6. Bobo December 30, 2016 at 2:56 pm

    Right on Mr H Austin –Facts of reality Tell it as it is–

    Reply
  7. Sunshine Sunny Shine December 30, 2016 at 2:57 pm

    If other companies decided to back up and leave and I am sure that the Barbados government would still find reasons to say that the S&P still has it all wrong and they are all right.

    Reply
  8. Breadfruit. December 31, 2016 at 2:02 pm

    You are so right sunshine

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *