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Tuesday, September 26 2017 @ 05:10 AM AST

Cuba expropriated billions from U.S. investors

Total claims against Cuba registered by the US Foreign Claims Settlement Commission exceed US$1.9 billion as the value of property has appreciated in many instances. Some estimate a modern day, more accurate estimate, taking into account inflation, would be US$7 billion.

Under the 1996 Helms-Burton Act, the US cannot lift the embargo until both governments agree to settle the more than 5,900 claims the US Foreign Claims Settlement Commission (an arm of the Justice Department) recognizes against Cuba stemming from the expropriation of property owned by Americans following the Cuban revolution.

The Foreign Claims Settlement Commission estimates the claims were worth $1.9 billion at the time and could now total over $6 billion, including interest.

The bulk of the claims are held by individuals, but the largest sums are held by companies. Claims include $71.6 million by Exxon Mobile (Aaa stable), $50.1 million by Texaco (Chevron Corporation, Aa1 stable), $50.1 million by Starwood Hotels & Resorts (Baa2 stable), and $27.5 million by the Coca Cola Company (Aa3 stable) (see Exhibit 1).

Moody's in an April 9 note said it understands that it will fall to the US State Department to negotiate the value of the claims with the Cuban government, and that significant losses could be imposed on claimants under a settlement between the two nations.

Moreover, even if substantial progress is achieved in scaling back or eliminating the embargo and Cuba opens up its economy to greater investment and capital flows, other financial contingencies limit potential upward ratings pressure. These include potential legal battles over defaulted sovereign, municipal and state-owned enterprise debt and bonds.

Foreign investors' willingness to lend to the Cuban sovereign in future would be highly uncertain, given Cuba's weak track record of debt repayment since 1986 (including defaulted Paris Club debt and a debt moratorium) and the possible restructuring of many defaulted securities, including pre-revolution-era debt instruments and post-revolution debt. Bloomberg estimates that, since 2010, trading of defaulted Cuban debt by institutions not subject to US bank regulations has averaged approximately $13 million a quarter globally, down from $100 million a quarter in 2009.

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