Following the conclusion of the European Union (EU) passporting process, the Government of the Republic of Seychelles announced today the full distribution of the Prospectus containing its offer to exchange its 9.125% Notes due 2011, its Amortising Notes due 2011, and certain loans with Seychelles as obligor (collectively, ‘Eligible Claims’) for new notes. The total amount of Eligible Claims is US$320 million.

Under the terms of the exchange offer, which is being supported by the African Development Bank (AfDB) through the provision of a partial guarantee on interest payments under the New Discount Notes, holders of Eligible Claims are being invited to tender their claims at the applicable ratio in exchange for either New Discount Notes or New Par Notes.

The New Discount Notes will be issued with a 50% discount on the principal amount of Eligible Claims tendered. These notes will amortise in 20 equal and semi-annual installments, commencing in July 2016 and ending in January 2026. Interest, which will accrue as of 1 January 2010, is based on a step-up coupon structure: the notes will carry a 3% coupon for the first two years from issuance, 5% for the next three years, 7% for years six, seven, and eight, and 8% from year nine through to final maturity. The New Discount Notes will benefit from a partial guarantee on interest from the AfDB of up to US$10 million.

The New Par Notes will amortise in seven equal and semi-annual installments, with the first one due in July 2038 and the final one in July 2041. The New Par Notes will bear interest at an annual rate of 2%, also as of 1 January 2010.

Under the terms of both the New Par Notes and the New Discount Notes, a oneoff ‘goodwill’ payment will be made in April 2010 in lieu of a portion of past due interest.

The President of Seychelles, Mr. James Michel, said “The launch of the exchange offer marks a critical point in the reform program we began in June 2008. We are making our debt sustainable. The IMF concluded earlier this year that our debt cannot be repaid on existing terms, and the terms of our exchange offer have been designed to place our debt burden firmly on a sustainable footing in conjunction with the debt relief being provided by other creditors. We will continue the aggressive reforms that have put our economy on track with the support of the IMF, the AfDB, and the World Bank. We know that there can be no turning back.”

The launch of the exchange offer follows a period of intensive discussions between Seychelles and affected creditors and representatives. “The dialogue that we have maintained in recent months has been conducted in a cooperative spirit, and has been indispensible in helping us to better understand creditors’ views on how best to deal with our country’s immense debt burden”, commented Danny Faure, Minister of Finance. “We are operating within very tight constraints, but we have sought to incorporate the feedback that we have received into the final terms of the exchange offer.”

“A number of our creditors told us that it was important to include both a par and a discount alternative in our exchange offer, which is why we are allowing creditors to choose the method of delivering debt relief”, said Ahmed Afif, Principal Secretary at the Ministry of Finance. “In recent weeks we have also been working hard to improve the terms of the new notes and the size of the goodwill payment to the limit of what is prudent under the medium-term macroeconomic framework that we have agreed with the IMF. We have also sought innovative ways of adding value for creditors in a way that does not place excessive pressure on future cash flows. This is the origin of the partial guarantee from the AfDB.”

Tenders by holders of Eligible Claims are due no later than 14 January 2010. The settlement of the transaction is expected on or around 11 February 2010.

Information concerning the offer may be obtained from Seychelles’s Information Agent, DF King & Co., One Ropemaker Street, London EC2Y 9HT; Tel. +44 20 7920 9700.

Holders may also contact White Oak Advisory LLP, the financial advisor to the Government in the transaction; Tel. +44 20 7969 2731.

Full details of other matters relating to the New Notes, including the terms and conditions of the New Notes and the terms of the Exchange Offer, are set out in the Prospectus dated 7 December 2009. The New Notes are only available to holders of Existing Claims and in accordance with the terms of the Exchange Offer.