Hunton Andrews Kurth Represents IDB and EIB in First-of-its-Kind Debt-for-Climate Swap with the Government of Barbados

In a landmark transaction that closed on November 28, 2024, Hunton Andrews Kurth LLP represented the InterAmerican Development Bank (“IDB”) and the European Investment Bank (“EIB”) as guarantors in the refinancing of $293.3 million of public debt owed by the Government of Barbados. This unique debt swap transaction will provide Barbados significant debt relief while generating over the life of the loan about $125 million in savings that will be dedicated to enhancing resiliency programs addressing the impacts of climate change. Each of IDB and EIB agreed to guarantee $150 million to the commercial lenders arranging the refinanced debt, and separately entered into agreements with the Government of Barbados to assure that the debt savings would be invested in sustainability projects, including those that improve the country’s water reclamation infrastructure and reduce marine and groundwater contamination.

The transaction is the first to create a sovereign sustainability-linked loan tied to water security and connected to certain benchmarks for sustainability targets. The projects to be fostered by this transaction are expected to help address Barbados’ water scarcity problem, which adversely impacts its agricultural production and makes the country reliant on expensive food imports. 

This deal reflects a growing trend amongst emerging market countries that are looking to reduce public debt burdens while creating space for investments in climate-driven initiatives, an area where Hunton Andrews Kurth has been very active.  For example, in 2021, the firm advised the U.S. International Development Finance Corporation in connection with a $364 million debt-for-nature swap involving the Government of Belize, and again in 2023 on a $656 million debt-for-nature bond with the Government of Ecuador for marine conservation in the Galapagos. 

The legal team was headed by in-house lawyers Sara Vila Saint Etienne for IDB and Pedro Bizzaro for EIB.  The Hunton Andrews Kurth team was led by Vera Rechsteiner, Ferdinand Calice and Alex Choinski, and was supported by associate Ken Black.