Investors holding Belize bonds met in Washington, D.C., on Friday with officials from the International Monetary Fund
to weigh their options amid a proposed restructuring of the sovereign's $543.8 million in debt.
One of the people present at the meeting said the creditors were on a "fact-finding" mission about the condition of
Belize's finances, after the country skipped an interest payment on a bond Monday.
Joseph Waight, Belize's finance secretary, also was in Washington, according to an assistant, and couldn't be reached.
The purpose of his visit couldn't be determined.
An IMF spokeswoman said Friday the fund hadn't received a request for financial help from Belize and the creditors had
asked to meet with IMF staffers to present their views on Belize's requested restructuring. She said the IMF staffers "
did not provide any commentary or information" and "agreed to the meeting only to listen."
On Monday, Belize failed to make a nominal interest payment on a bond due 2029, setting in motion a 30-day grace
period before it would be in default, without curing the lapse before Sept. 19. Earlier this month, it proposed three
options for a restructuring, two of which would see creditors writing down 45 cents on the dollar of what they are owed.
Creditors to Belize include GE Asset Management, Grantham Mayo Van Otterloo & Co. and Greylock Capital Management LLC.
A partner at Greylock, A.J. Mediratta, is co-chair of the committee, which represents more than half of holders--or $300
million--of the 2029 bond, the country's only bond.
It is unclear if Friday's talks helped the creditors progress in their evaluation of the country's financial distress,
but one person familiar with the matter said some key sticking points remain. These include the creditors wanting more
details on the companies Belize nationalized and the components making up its fiscal projections.
Belize bonds due 2029 traded around 38 cents on the dollar late Friday, in line with a week ago, according to Markit
data. Standard & Poor's cut the country's credit ratings to "D" for default on Tuesday.
Central Bank talks about upcoming Superbond meeting
Aside from crime, there is the Superbond for which there has been international backlash after government did not make a forty-six million dollar coupon payment that was due on August twentieth. The debt review team is making its media rounds after concluding talks in Washington with the IMF. The governor of the Central Bank, Glen Ysaguirre and the deputy governor, Christine Vellos, say that it is likely that a deal will be worked out with bondholders, even after the September nineteenth grace period expires. According to Ysaguirre, the first face to face meeting with the bondholders is expected to be convened either late next week or early in September and a definitive offer should be on the table by the middle or ending of the month. He says that an extension of the grace period may be an option, depending on how negotiations are going at that point. We asked him about the expectations for the meeting with bondholders.
Glen Ysaguirre, Governor, Central Bank of Belize
Glen Ysaguirre
"The expectation would be that the creditors would then hear our case, we sit down with them and go through the numbers; we want to be able to verify those numbers and that is one role that we expect the IMF to play. We are seeking from the IMF actually a letter of assessment of the conditions that Belize is facing in terms of its fiscal numbers and its macro numbers and for them to indicate whether or not those are realistic given what they know. They have been monitoring the country under the article four provisions-they monitor all countries-and they provide this kind of information for general use. So at that meeting that is what is expected to happen. The creditors may very well make some suggestions to the scenarios we put there. The scenarios that the government presented are three scenarios; I think two with a haircut of forty-five percent and various introductions of interest rates and grace periods and then there is a par value option with an extended maturity. The creditors do not necessarily have to accept those, but what we are saying, having produced our numbers and worked out the gaps that unless we get something that gives us a return similar to those, we would not have the capacity to service the debt. You could come close or you could make some adjustments here or there, we are interested to see what those will be but we will need to come close to what is presented there, otherwise it will be something that would not be sustainable for us and we would only be again kicking the pan down the road and we do not want to accept an option that is not sustainable."
Financial adviser confident of super bond renegotiation deal
Allan Slusher
Belize's external debt, also known as the sovereign bond and commonly referred to as the super bond, continues to generate a lot of interest in the international financial services sector. Following the missed coupon payment of twenty three million US dollars last week, the rating agency Standard and Poor downgraded Belize and was followed later in the week by Moody's investor services. In the case of the Wall Street-based Moody's Investors Service, the agency lowered Belize's local currency bond and deposit ceilings to B2 from B1. The foreign currency country ceilings on bonds and deposits remain unchanged at Caa2. Moodys in its report released late last week, said it expects the government will formally default following the expiration of a 30 day grace period in September, unless a restructuring agreement is reached before then. Belize's debt renegotiation team, headed by Ambassador Mark Espat was in Washington, D.C. over the weekend for meetings with officials of the Inter-American Development Bank and the International Monetary fund. According to Minister Godwin Hulse, who is also a member of the debt restructuring team, the talks with the IDB were very positive and now the team awaits support from the IMF. Belize has published its three-pronged offer towards a negotiated restructuring of the five hundred and forty seven million US dollar foreign debt. Advisor to the Minister of Finance Allan Slusher today told Love News that those three scenarios published earlier this month are solid starting points for the government of Belize, given what is at its disposal going into the negotiations.
Slusher says he is optimistic that the solution will come after what he called a choreographed maneuvering by the bond holders.
According to Moody's Investor Services, the super bond, accounts for 48 per cent of total central government debt and 57 per cent of Belize's external debt. The agency noted that the indicative scenarios released by the government on August 8 - a par bond and two discount bond options - resulted in bondholders absorbing losses of 70-80 per cent in net present value terms. Moody's continue to maintain that, quote: "the government's decision to trigger a credit event and force investors to take deep haircuts is a credit negative development that increases the odds of a protracted debt exchange process," end of quote.
Bondholders Want More Info; GOB Says They Are Stalling
More information, that's what a group of Belize Bondholders say they want.
The Miami-based Coordinator Committee which says it represents the owners of more than half of the Belize bonds issued a release today saying quote, "The evaluation process has been impacted by delays on the part of the GOB in providing key information requested by the Committee."
As we understand it this is information having to do with BEL and BTL - the compensation for which has been added to the overall debt profile.
And until they get what they call full disclosure , the Coordinator Committee says it will rely on the IMF Article Four report published last December, as, quote, "the definitive active financial analysis for Belize."
But a representative of the debt restructuring team told us today that it is not a matter of non-disclosure, but instead it is posturing and a stalling tactic - so that Belize will be pushed to the default deadline which is September 19th. This prospect of default would cause some alarm in most capitals, but in Belmopan, we're told that in the 30 days - government's resolve will only strengthen.
The Creditors Group also claims that the restructuring scenarios were released before there was any quote, "substantive discussion with bondholders." The representative for the Belize negotiating team called this quote "a certified untruth" as Government spoke with bondholders representing almost 90% of the bond holdings since June.
Unmoved, the Creditors committee says, quote, "the recent adversarial actions of the GOB are counterproductive to a rapid conclusion of negotiations."
That quote is actually from AJ Mediratta the Co-Chair of the Committee. As we've mentioned before, he should know a thing or two about the play of things since he was at Bear Stearns when Belize was floating Bonds there. And when Belize wanted to restructure those bonds ot make the Superbond, Mediratta was also there - trying to get in on the job. Government had chosen another firm - and Mediratta, then still at Bear Stearns was bad mouthing that firm, writing to then Prime Minister Said Musa, quote: "Making the decision to go down a restructuring path, however "market-friendly" the intention is never an easy one and is often mired with unanticipated consequences and pitfalls. Belize will need someone on their side who is experienced in navigating the potentially treacherous waters ahead."
It is a neat turn of events that Mediratta is now the one in those treacherous waters.
Belize Gains Leverage in Default Talks as New Borrowing Not Seen
Belize's creditors are betting the Central American country will improve its bond restructuring offer in order to maintain access to global debt markets. The government says it doesn't need them.
Belize's $1.4 billion economy, which expanded 2 percent in 2011, can go without more borrowing on international credit markets, Prime Minister Dean Barrow said in an Aug. 22 press conference. The country didn't sell global bonds before 1998 and hasn't returned to them since a 2007 restructuring.
Barrow's government, which missed a $23 million coupon payment on Aug. 20, is seeking to reach an accord with creditors before a mission from the International Monetary Fund comes to the country in October as part of an annual review of the economy, according to Mark Espat, who heads the country's bond restructuring committee. Belize's ability to survive x'without global market access may give it an advantage in talks, said Stuart Culverhouse, chief economist at Exotix Ltd.
"I am not sure at the moment the government does care that much about accessing the capital market," Culverhouse said in an Aug. 30 phone interview from London. "I don't know if the creditors' leverage is that strong."
While both creditors and the Belize officials have expressed the need for "good faith" negotiations, a group representing Belize's investors says the government hasn't provided sufficient justification for its default and subsequent restructuring offers, which value the bonds at about 20 cents.
Worst Performer
Belize's so-called superbond rose 0.05 cents to 35.13 cents yesterday. The gap between the valuation in the government's restructuring scenarios and the market price show investors expect they will be able to negotiate a better offer.
Belize's default made the country's debt the worst performer in emerging markets for a second consecutive month in August. The country's dollar bonds fell about 24 cents last month, the most among 52 emerging-market countries tracked by JPMorgan Chase & Co's EMBIG index.
Standard & Poor's declared Belize's bonds in default on Aug. 21, when a 30-day grace period on the missed payment began. The country formerly known as British Honduras had been rated as high as "B," five levels below investment grade, in August 2011.
IMF Review
The investors committee, which says it represents holders of about 60 percent of the outstanding superbond, said in an Aug. 28 statement that the IMF's last review of the economy, published in December, "did not highlight a debt sustainability concern and the committee is seeking to understand the key assumptions underlying Belize's decision to default."
Messages sent to Belize's Finance Ministry and central bank for comment were responded to by Espat, a lawmaker who helped lead the 2007 debt restructuring and joined Barrow's party ahead of this year's election.
Barrow won re-election in March vowing to restructure the bonds after the coupon on the notes jumped to 8.5 percent from 6 percent as part of the agreement reached with creditors in 2007. He said that the government couldn't afford to continue making payments on the debt even as Belize's economy heads toward growth of 3 percent in 2012, one percentage point higher than previously forecast.
"We are in a period where parties are basically dancing," said Carl Ross, who helps oversee Central American and the Caribbean as a managing director of investments at Oppenheimer & Co. in Atlanta. "The government is sending the message that they don't intend to improve terms in a significant way. Creditors are feeling that the government put more burden- sharing on the bond holders."
Washington Trip
Espat met with officials at the Inter-American Development Bank and IMF in Washington late last month to discuss the default. Belize has received about $100 million in assistance from the IDB over the past five years, according to the Washington-based lender's webpage. Spokesman Pablo Bachelet said Belize and the IDB are in discussions about "alternatives for support."
Ross said creditors could try to convince multinational agencies to deny further lending to Belize because they violated debt restructuring principles. He also said the threat of protracted litigation could be sufficient to get Belize to improve its offer.
The U.S. last year began voting against development loans to Argentina by the IDB and the World Bank as part of an effort to get the South American country to settle with holders of defaulted debt and make payments owed to investors who won arbitration cases.
Beyond global debt markets and the IDB, Belize has access to bilateral financing from Venezuela and Taiwan, Espat said. Taiwan Vice President Wu Den-yih didn't offer the country additional aid during an August visit, Espat said.
Argentina's Lawyers
Belize's government is also working with New York-based law firm Cleary Gottlieb Steen & Hamilton LLC, which advised Argentina on its two debt restructurings following a 2001 default on $95 billion of bonds. Holders of defaulted debt who didn't participate in two bond restructurings since then haven't been able to claim Argentine assets abroad in the wake of the country's financial crisis.
The 61-year-old Barrow said on Aug. 22 that he was certain an agreement could be reached with creditors and that debt relief for Belize is "a sure thing." The unity of the investors committee gives creditors leverage with the government, said Michael Gerrard, a managing director at BroadSpan Capital LLC, which specializes in Caribbean debt restructurings and is advising the committee.
"Global credit markets happen to be the most costly and the most fickle for a small, emerging economy such as ours," said Espat. "It is important not to equate a 'good faith process' with an outcome that makes either Belize or bondholders cheery."
Poll shows enormous support for tax increase to pay Superbond
The Superbond restructuring continues to be hotly debated. So in our latest internet polling, we asked: Should GOB increase taxes to pay for the super bond? Over two thousand participated and surprisingly, seventy-three percent voted for the tax increase while twenty-seven percent were against it. On our blog, however, all the posts were vehemently against increased taxes. One viewer commented that, "We Belizeans must refuse to pay more taxes. If you did the research, Belizeans already pay a cumulative tax of sixty cents on every dollar received."
Superbond: Today Is D-Day, But is it "D" For Default?
Government announced that it would not make the Superbond payment more than a month ago. The payment was due on August 20th - and the actual default is triggered 30 days later - which is today, September 19th.
There's been no announcement of anything changing with the bond negotiations- so we were kind of expecting today to be the day of default.
But, sources tell us that it might not be. And that's because we understand there have been talks between Government and the creditor committee - which represents a majority of the bondholders.
As we understand it - the two sides are still a ways apart on the terms of a new bond - but they may have agreed on a way forward.
And, for the time being, we are told that may involve the extension of a the grace period for default - in exchange for a goodwill gesture from government in the form of a partial payment.
Again, these are only reports, but either way - an announcement is expected today.
Failure to pay would mark default on about half of govt debt
No consensus with creditors on bond exchange offer
MEXICO CITY, Sept 19 (Reuters) - Belize will not make a crucial Wednesday deadline for making a payment on its sovereign bond, the head of the government's debt restructuring team said on Tuesday, effectively paving the way for a formal default on $550 million in debt.
The tiny Central American nation in August missed a $23.5 million interest payment on its so-called superbond, saying it could not afford the rate, which had increased to 8.5 percent from 6 percent. That move set the clock ticking on a 30-day grace period that ends Sept. 19.
Failure to pay on Wednesday would mark a default on about half of the government debt.
"Belize does not have the capacity to repay on the current terms - it did not have this capacity on August 20, so that condition can only change with debt relief," Mark Espat, who is negotiating with bondholders on behalf of the Belize government, told Reuters.
While the amount of distressed debt is tiny by global standards, one analyst called the restructuring terms offered among the worst in recent times with potential repercussions beyond Belize.
Espat said there is no clear consensus so far with creditors on the terms of a debt exchange offer.
"The government expects negotiations to proceed after the expiration of the 30-day grace period," he said. "Transparent and good faith negotiations is the only viable pathway for a fair resolution of Belize's unsustainable debt burden."
Belize said last month it was confident it could successfully negotiate a restructuring of the superbond and laid out three possible scenarios for doing so, including a steep haircut on the amount of principal to be repaid and extending the maturity date. [ID: nL2E8J9JPE]
Espat said these were not final offers and that the country would welcome counter proposals as long as they match its ability to pay.
Ratings agencies and analysts expect bondholders would likely face severe losses and may fight for better terms.
Joe Kogan, head of emerging markets strategy at Scotiabank in New York, suggested that Belize was taking its cue from larger Latin American players like Ecuador and Argentina in its aggressive negotiations with creditors. He believes investors will get as little as 20 cents for every dollar invested.
"We have had a number of cases over the last decade of sovereign countries being very aggressive in the way they negotiate with bondholders and largely getting away with it," he said.
Investors in the future may stay away from countries that have few foreign ties and don't really need access to global capital markets, he said.
"There's a subset of small countries where the costs of defaulting may be lower than in places that are very open and investor friendly and are issuing all the time," Kogan said.
Belize seeks to reschedule half of its foreign debt
On the eve of crunch talks to avert default, the tiny Central American state of Belize said on Tuesday it was asking its creditors to reschedule roughly half of its $1.1 billion foreign debt.
"Belize will launch an exchange offer at such time that there appears to be a general consensus around new terms, based of course, on Belize capacity to pay," Mark Espat, the government official in charge of debt rescheduling, told AFP.
"We believe that all parties recognize that a fair solution will only be reached through good faith and transparent negotiations," he added.
On August 20, Belize, the only English-speaking country in Central America, missed a $23.5 million bond payment and has until Wednesday to renegotiate its total $1.1 billion debt.
"The government is optimistic that a resolution will be attained. Even though Belize's government does not require access to external commercial credit, rendering an expiration of the grace period inconsequential, there is a steadfast commitment to a timely negotiated agreement of new debt repayment terms, based on the country's capacity to repay," Espat said.
"Our government is convinced that negotiations rather than a legal wrangle is the best path for resolution," he added.
The economy of this country of 300,000 people is mainly based on tourism, farming and fishing. Belize posted sluggish economic growth of two percent last year, down from 2.7 percent in 2010, according to the central bank.
Prime Minister Dean Barrow won re-election in March, vowing to restructure the debt bonds, which mature in 2029, after the coupon on the notes jumped to 8.5 percent from six percent as part of the agreement reached with creditors in 2007.
After failing to make the $23.5 million bond payment in August, Belize's Prime Minister Dean Barrow notably proposed to cut interest rates, currently standing at 8.5 percent.
The government's negotiating team, meanwhile, met last week with officials of the Inter-American Bank to weigh various options for possible assistance.
A 30-day grace period for Belize to make a payment on $544 million of defaulted bonds ends today with the Central American country's government and creditors still trying to reach an accord.
"While the grace period ends, we do not believe this will interrupt negotiations," Mark Espat, the government's chief negotiator in the debt talks, said in an e-mail message. "The government's view is that a fair and timely resolution is only possible through transparent and good faith negotiations."
Belize, which has a population of 333,000 people, missed a $23 million interest payment Aug. 20 after Prime Minister Dean Barrow won re-election this year on promises to restructure borrowings. The government is holding talks with a creditor group that holds more than $300 million of debt.
Belize's bonds due in 2029 fell 0.48 cent to 34.56 cents, according to Bloomberg data, after trading just above 35 cents since the middle of August.
Bank of Nova Scotia and Citigroup Inc. say the government's three proposals to restructure debt presented Aug. 8 give the securities a net present value of about 20 cents, the least among 16 sovereign debt restructurings since 1998.
AJ Mediratta, a partner at Greylock Capital Management in New York who is leading the investors group, declined to comment on the committee's negotiations with the government.
BELIZE CITY, Sept 19 (Reuters) - Belize is considering making a partial payment on its "superbond" as a sign of good faith in talks with creditors aimed at restructuring $550 million in debt, Prime Minister Dean Barrow said on Wednesday.
The tiny Central American country missed a $23.5 million interest payment on the sovereign bond in August and, according to analysts, was set to default on $550 million of debt as of Wednesday when a 30-day grace period ended.
"We have been talking about the possibility of a partial payment," Barrow told reporters, noting that he had been briefed on the status of talks with bondholders early on Wednesday.
Barrow downplayed the impact of what he referred to as a "technical default" and said he was optimistic about reaching a compromise.
"I've said that the deadline and the triggering of a technical default doesn't have any serious practical consequences. In any event, there would be extensions that are automatically built into the process," he said.
"But we are prepared to demonstrate some good faith if in turn we get from the bondholders what we consider to be reciprocity."
Representatives of a bondholder committee were not available to comment.
After the interest rate on the superbond rose to 8.5 percent from 6 percent, Belize said it could not afford to service its debt. The country is reliant on tourism, fishing and farming,
While the amount of debt in question is miniscule, analysts have argued that Belize's approach to creditors is part of a larger trend that injects uncertainty into financial markets.
Last month, the government laid out three proposals for rescheduling its bond payments, shocking analysts with its suggestion that they take a haircut of up to 45 percent on their investment.
The head of the government's negotiating team said on Tuesday that Belize was open to counter offers.
The Superbond payment was due a month ago - and 30 days after it's due - if no payment is made - the country is considered to be in default.
Our indications were yesterday that an extension of the default period would be worked out with bondholders in exchange for a partial payment of the 46 million dollars that was due a month ago. But, up to newstime - no announcement had been made - so tonight we take the position to be that Belize has defaulted on its Superbond debt.
It was foretold - but still, it is not an entirely desirable state of affairs.
And it doesn't seem to be quite what the Prime Minister and Minister of Finance Dean Barrow expected when he returned from Houston with his ailing wife today.
The media caught PM Barrow at the airport and here's what he told us about the deadline:..
Jules Vasquez "Sir, its 5:15pm eastern time and I haven't seen any press release. Has Belize defaulted?"
Hon. Dean Barrow - Prime Minister "You haven't seen any press release? I don't think we have. I have a conference call with our advisors this morning from Houston, which was at 9am Belize time and we certainly - it appeared making some progress with the bond holders. If things change dramatically between then and now I would not have had an opportunity to be briefed. I am pretty confident that we are in decent shape as far as the negotiations are concern."
Jules Vasquez "Will a compromise be worked out?"
Hon. Dean Barrow - Prime Minister "It depends - if you are talking about a compromise immediately or a compromise over the longer term. Actually I would say that I am fairly optimistic that in both cases a compromise will be reached."
Reporter "Has there been any partial payments for any extension of the deadline?"
Hon. Dean Barrow - Prime Minister "There has been no partial payment yet. We have been talking about the possibility of a partial payment. It would not be if it is made so that the deadline might be extended. We are prepared to demonstrate some good faith if in turn we get from the bond holders what we consider to be reciprocity and I will say again that the discussions have been proceeding in a fashion that makes me feel there is a good basis for cautious guarded optimism."
This evening, Bloomberg Business News quoted the head of the Debt Restructuring Team Mark Espat as saying, quote, "While the grace period ends, we do not believe this will interrupt negotiations."
The Wall Street Journal reported today that quote, "a default would set up a likely showdown later this year, when analysts expect the government to submit a restructuring offer to investors. Creditors will then choose to participate or pursue litigation against the country in U.S. courts." End quote.
It's a story that we expect to continue to develop this week - and we'll have updates as things progress, or regress.
We have not defaulted we made a partial payment today as a sign of good faith. it works more like your creditcard as long as the card company doesn't report you as 30 days late your credit is not affected.....
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AmbergrisCaye.com 
"You haven't seen any press release? I don't think we have. I have a conference call with our advisors this morning from Houston, which was at 9am Belize time and we certainly - it appeared making some progress with the bond holders. If things change dramatically between then and now I would not have had an opportunity to be briefed. I am pretty confident that we are in decent shape as far as the negotiations are concern."
