Bonus report: Cuban debt –
the awakening?

(Full access for Members only)

Bonus Report: Cuban debt – the awakening?

6 February 2020

Fidel Castro's Cuba defaulted on debt totalling USD 63bn. However, its financial self-interest eventually brought the country to the negotiating table. Without a settlement of old debt, new funding sources are blocked.

Between 2011 and 2015, Cuba signed compromise agreements for 85% of its entire outstanding debt. Only two categories of debt remain outstanding:

  • Commercial debt totalling USD 9.4bn, mostly organised in the "London Club".
  • Pre-Castro debt, with an issue value of probably just USD 150m.

Hardly anyone would know that some defaulted Cuban debt securities are listed on a European stock exchange. Also, there is at least one focussed Cayman Islands-based investment fund, and you can even invest in Cuban land expropriation claims.

I wrote about the subject in my 2006 book, which was prescient in some aspects and too early in others. Today's report is an exclusive update with behind-the-scenes information. 2020/21 is likely going to bring significant new developments for claims against the Cuban government. It's an extremely illiquid and difficult-to-trade asset class, but a fascinating and entertaining one. Prices are currently quite low and could yield a 4 to 6 times return – provided you find a seller.

Defaulted sovereign debt can be a lucrative asset class, but most investors have no idea it even exists. This report makes for a fascinating case study, and it will provide you with a good understanding of the key issues. Its lessons may be applied to other, more liquid situations with more liquid and easier-to-access trading, such as Venezuelan debt (which this website might report about in the future).

Since it's currently very difficult to invest in Cuban debt, I am making this one of my two annual "Bonus Reports". It doesn't count towards the ten investment ideas that I deliver to my Members every year.

Connoisseurs of the exotic and the obscure – read on!

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