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Committee of Bondholders express disappointment with negations

There is breaking news room regarding the bond. The Coordinating Committee of Bondholders formed to address matters relating to the potential restructuring of Belize's U.S. Dollar Bonds Due 2029. They have expressed disappointment and concern over the Government of Belize's recently published indicative restructuring scenarios. The press release by the coordinating committee of bondholders says while they were initially encouraged by the Government's stated commitment to a "fair and transparent dialog," the Coordinating Committee is having difficulty reconciling the scenarios and the financial information released by the Government on June twentieth.

According to AJ Mediratta, a Partner at Greylock Capital Management, LLC and Co-Chair of the Coordinating Committee, "Bondholders have more questions than answers at this point," making reference to the fact that the scenarios were released despite the absence of material information necessary to evaluate the country's debt sustainability. "We previously communicated from the beginning that we are sympathetic to the challenges facing Belize and are prepared to work with the authorities in a consensual and collaborative manner. However, we do not consider the indicative scenarios released last week as the start of negotiations. This is the most organized and unified group of bondholders involved in a recent sovereign restructuring, and it is our position that we will respond to proposals that are clearly based on ability to pay using reasonable, mutually agreed assumptions as well as demonstrated burden sharing among commercial, bilateral and multilateral creditors and, importantly, the Government itself," added Mr. Mediratta.

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Oppenheimer says proposed terms significantly worse for bondholders

The feedback on the bond restructuring continues to be far from welcoming. According to a recent report by Carl Ross for Oppenheimer issued on August tenth, 2012, "The the proposed terms were significantly worse than most people expected, with a major lengthening of maturities and a drastic cut in coupon levels." Ross estimate that the deal, as presented, is worth between twenty and forty cents on the dollar, depending on assumed post-restructuring yield attached to the Belize credit. The report outlines some of the events to watch and items to consider for those involved in the bonds. The key points are consistent with analysis and reports perspectives by several market analysis and commentaries.

That is indicating a rather combined consensus or dismissive reaction from the bondholders to not entertain or accept the significant losses in the scenarios of forty-five percent of the initial value of the bonds. Based on bondholders response, Oppenheimer's Carl Ross states that; "These investors see neither the need nor the urgency for the scope of NPV haircut being offered by Belize, and Belize is likely to become a financial outcast in the region as a result." Belize's current depressing macroeconomic scenario adds more complications to the huge debt obligations as questions are raised on where and how the 'reforms' stated as alternative within the 'bond restructuring scenarios' would be achieved.

The fall in foreign direct investment and the huge additional debt burden as a result of nationalizations will have an ever more negative effect on Belize's gargantuan debt burden, emphasizes Oppenheimer's analysis. What is also questioned is the lack of clarification on the allocation for the liabilities imposed by nationalizations and the amount of compensation within the restructuring bond scenarios. In other words, how and where are the monies stipulated for compensation being allocated within the restructuring scenarios? Oppenheimer states, "Belize fiasco is that the 2029 bond is not the main debt problem faced by the government…Rather the compensation that needs to be paid for the nationalizations, combined with amortizations due to multilateral and bilateral creditors, are the most onerous debt obligations over the next several years."

The report goes on to say, "the government unilaterally nationalized these companies, creating a huge contingent liability…it is difficult for bondholders to analyze this restructuring offer from the government without first knowing the size of the settlements to be paid to the former equity holders of the companies…"

The report reiterates consistently what many other reports have been stating with reference to bondholders, saying; "Belize's debt problem is as much a result of their unilateral nationalizations, as well as multilateral amortizations over the next few years, than the private sector debt. Its creditworthiness will be tarnished for a very long time as a result of this action."

Channel 5

now what?

http://www.sanpedrosun.com/business...le-to-meet-superbond-payment-for-august/

PM Barrow now says he won't pay the Aug. 20 scheduled payment on the super bond. The Ministry of Finance just put out a statement saying the August 20 coupon payment will not be made.
Here we go...

As of yesterday, the superbond is trading at a 70% discount. If Belize was to pull a ecuador we could buy back all or debt at 167 million.

Belize Unable to Meet Coupon Payment

Belmopan, Belize: The Government of Belize announced today that it is unable to make an August 20, 2012 coupon payment on the country's U.S. Dollar Step-Up Bonds Due 2029. Belize has already commenced discussions with the holders of this bond regarding a consensual restructuring of the instrument.

"The Step-Up Bond alone represents approximately one-half of Belize's total recorded public indebtedness", said Dean Barrow, Prime Minister of Belize and Minister of Finance and Economic Development. "The annual interest rate on this bond stepped up earlier this year to 8.5%. We simply cannot afford this coupon payment given the financing shortfalls and other challenges we face. Our hope, however, is that we can move quickly toward a sensible restructuring of the instrument."

Belize has previously posted on the website of its Central Bank (https://www.centralbank.org.bz/financial-system/information-for-creditors) both an Economic Memorandum and a set of possible Indicative Restructuring Scenarios

The Government of Belize today announced that it will not be able to meet its super bond payment to its creditors due for August 20^th. The announcement was made via a press release (above) from the Ministry of Finance shortly after midday on Tuesday August 14^th. The Superbond payment amount due is US$23,497,211.11 at an interest rate of 8.5%. Prime Minister Dean Barrow is quoted in the release as saying that "The Step-Up Bond alone represents approximately one-half of Belize's total recorded public indebtedness."

After the re-election of the UDP administration into office, PM Barrow had appointed a negotiating team headed by former PUP Albert Division Representative Mark Espat to look at the Superbond negation to arrive at more manageable payment terms. So far the team came up with three possible alternatives to restructure the current payment.

• Scenario A sees the bond principal remain at par value having no reduction in the principal amount to be paid. It offers a 15-year grace period with a 2% interest rate and reaching maturity at 2062. Payments are to be made in equal semi-annual principal installments after the grace period.
• Scenario B has the principal discounted to 45% of the original amount, there is no grace period with principal payments being made at 1% through to 2019, 2% through to 2026 and 4% through to 2042, which will be the maturity date of the bond. In this scenario, payments are to be made in equal semi-annual principal installments.
• In Scenario C, the principal is also discounted to 45% of the original value with a 5-year grace period and maturity date of 2042. Interest rate would be at 3.5% throughout until 2042. In this scenario, the payments will be made on a monthly basis to cover both interest and principal after the grace period.

All three scenarios were met by stern disapproval by bond holders.

The announcement made today comes despite Prime Minister of Belize Hon. Dean Barrow's announcement during the reading of the Budget estimate for 2012-2013 that money was allocated for the August payment to bond holders. With PM Barrow's announcement today, it remains uncertain as to what will be the next step between the Belize Superbond team and the bond holders in the current restructuring negotiations.

San Pedro Sun

Wall Street Journal On Belize Bond Default

By Georgia Wells

The Belize government won't be making payments on its 2029 bond, the country's prime minister said in a statement Tuesday, setting up a potential default if the country isn't able to restructure its debt.

The 2029 bond represents approximately 50% of Brazil's total public debt, and the government says the payment, due Aug. 20, is too high.

"We simply cannot afford this coupon payment given the financing shortfalls and other challenges we face," said Dean Barrow, prime minister and finance minister of Belize. "Our hope, however, is that we can move quickly toward a sensible restructuring of the instrument."

If the government fails to pay the bondholders within 30 days of Aug. 20 it will default on its debt. However, the government is expected to renegotiate the structuring of bonds in the future.

"I guess the Belize government wanted to start from a position of strength," said Boris Segura, analyst with Nomura Securities. "It's going to be a tough negotiation."

Bondholders and the Belize government have been negotiating since the country said it found its monthly dues too high. Last week, the Central Bank of Belize proposed a restructuring of the bond that would discount its value and reduce its coupon rate, according to a note on the bank's website.

Ultimately the government is supposed to come up with a deal that 75% of bondholders agree to before they can proceed with the restructuring.

But the government has the money to pay the coupon, and instead has decided not to pay it, analysts say.

Prior to saying it wouldn't make the payment, the government had insisted it wanted to process to be orderly and market friendly.

Write to Georgia Wells at georgia.wells@dowjones.com

Belize Won't Make Superbond 46 M Payment On Aug 20

This morning at 7:00 - which is 9:00 in New York - the Government of Belize sent out a brief, 150 word press release telling holders of the Superbond that it won't make the 46 million dollar Superbond payment which is due next week Monday.

The plain-spoken release says, quote, "The Government of Belize announced today that it is unable to make an August 20, 2012 coupon payment."

It quotes the Prime Minister as saying "The Step-Up Bond alone represents approximately one-half of Belize's total recorded public indebtedness... We simply cannot afford this…payment given the financing shortfalls and other challenges we face. Our hope, however, is that we can move quickly toward a sensible restructuring."

And the release doesn't say much else - but the effect of it is tremendous. It puts bondholders on notice that the Government of Belize isn't playing around - and if they want their money, they'll have to come to the bargaining table.

It also puts Belize in that position that no person or country wants to be in: that of a Malpago. But according to Economic Ambassador Mark Espat, who is heading the Debt Restructuring team, not making the payment does not put Belize in a difficult position with accessing other credit - since Belize does not seek commercial credit.

He conceded though, that a sharp rating downgrade is likely - but he says the effect of that is minimal since, again, Belize does not seek commercial credit.

Now, we should note that this is a suspension of payment, and does not represent a debt default - a default only arises 30 days after a payment is due and not made.

Depending on how things go, we may still get there but this country has been there before. Back in late 2006 and early 2007 - when the Superbond was launched the Musa Administration did suspend payment as a means of forcing existing bondholders to buy into the Superbond.

It worked - and now the Barrow administration is using more or less the same tactics to get them to buy into a Superbond 2.0. Also important to note is that the Government probably can make the 46 million dollar payment - it was budgeted and Government has not run out of money.

But the position being adopted is that the sacrifice to make the payment is too great when the step up interest payments are unsustainable.

The reactions have started to come in.

This evening, it was announced that Standard and Poors was lowering its sovereign credit rating on Belize to 'CC' from 'CCC-' with a negative outlook.

S and P warns that the rating will be further downgraded to SD - meaning selective default if Government fails to make next week's payment. As we understand it, that is not a matter of "if" but when - since it is a virtual certainty that the payment will not be made.

The PUP also sent out its reaction this evening, noting its quote, "grave concern" that the payment will not be made. The party laments that the leader of the opposition was not consulted or informed and calls for the Prime Minister to address the nation on the specific reasons for the decision.

But even with that, the Opposition release says that the party hopes that the Bond Restructuring exercise is successful.

Channel 7

S&P Cuts Belize's Rating On Expected Miss Payment

And late this evening, Belize's sovereign-credit rating was pushed further into junk territory by Standard & Poor's. S&P downgraded Belize's credit rating to a double C from a triple C-minus after the Barrow Administration officially announced that it won't be making its $46 million bond coupon payment on August 20th.

In an article posted on online.wsj.com S&P states and we quote

"The outlook is negative, reflecting prospects the firm could lower the ratings to selective default if Belize's government misses its payment as announced or if it proposes a debt exchange to investors." End quote.

If the Barrow Administration fails to pay the bondholders within 30 days of August 20TH, it will default on its debt. S&P expects GOB to fund its gap through the exceptional financing of default, import compression and a drawdown of reserves. The rating cut is the latest in a series of downgrades this year from S&P and Moody's Investors Service, as both rating firms cited concerns about the possibility of another debt restructuring. In June, Moody's downgraded Belize's sovereign debt rating to Ca, pushing it deeper into highly speculative territory. Late this evening the Opposition People's United Party weighed in on the much discussed issue of Governments default on its $46 million bond coupon payment. According to the PUP "The Leader of the Opposition was neither consulted on nor informed of this very critical decision which has very serious implications for Belize's economy and development. During the Budget debate for 2012/13 the Nation was led to believe that the government had budgeted for this payment and would be honoring the August 20th, 2012 payment." End of quote. The PUP concludes their press release by calling on the Prime Minister and Minister of Finance to immediately address and inform the Nation on the specific reasons for the decision and the consequences and implications expected to follow.

S&P Cuts Belize's Rating on Expected Missed Payment
Standard & Poor's lowered its sovereign-credit rating on Belize further into junk territory, after the country's government said it won't make its coming coupon payment on its bonds due 2029.

S&P downgraded the Central American country's rating to double-C from triple-C-minus. The outlook is negative, reflecting prospects the firm could lower the ratings to selective default if Belize's government misses its payment as announced or if it proposes a debt exchange to investors.

Earlier Tuesday, Belize's government said it won't pay the $23 million semiannual coupon due Aug. 20 on its $546.8 million bonds due 2029.

Negative Reactions Towards GOB Restructuring Bond Options

But markets have reacted negatively to Belize's indicative restructuring proposals. Citigroup analysts describe Belize's options as a "threat of a credit event rather than a willingness to negotiate."

AJ Mediratta, a partner at Greylock Capital Management and chairman of the ad-hoc committee of holders formed a few months ago states an we quote "We previously communicated from the beginning that we are sympathetic to the challenges facing Belize and are prepared to work with the authorities in a consensual and collaborative manner. However, we do not consider the indicative scenarios released last week as the start of negotiations. This is the most organized and unified group of bondholders involved in a recent sovereign restructuring, and it is our position that we will respond to proposals that are clearly based on ability to pay using reasonable, mutually agreed assumptions as well as demonstrated burden sharing among commercial, bilateral and multilateral creditors and, importantly, the Government itself." End of quote

According to a recent report by Carl Ross for Oppenheimer "The proposed terms were significantly worse than most people expected, with a major lengthening of maturities and a drastic cut in coupon levels. These investors see neither the need nor the urgency for the scope of NPV haircut being offered by Belize, and Belize is likely to become a financial outcast in the region as a result." End of quote.

As it pertains to the nationalization of BTL and BEL, the release states "Belize's fiasco is that the 2029 bond is not the main debt problem faced by the government…rather the compensation that needs to be paid for the nationalizations, combined with amortizations due to multilateral and bilateral creditors, are the most onerous debt obligations over the next several years. The government unilaterally nationalized these companies; creating a huge contingent liability…it is difficult for bondholders to analyze this restructuring offer from the government without first knowing the size of the settlements to be paid to the former equity holders of the companies." End of quote.

CTV3