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Belize Buys Time by Making Half of $23 Million Bond Payment

Belize agreed to make about half of a missed payment on $544 million of its debt, buying time as it negotiates with creditors.

The Central American country will pay holders of a 2029 bond $11.7 million of the $23 million that they're owed, according to statement issued today.

"This suggests Belize doesn't want to walk away from the negotiation and cares about the public relations part of it," Joe Kogan, the head of emerging-market debt strategy at Scotia Capital Markets, said in a phone interview from New York. "It's a step towards building goodwill. There's some reason to expect a better outcome than Belize offered initially."

A day after Belize missed the payment on Aug. 20, Standard & Poor's lowered its rating to selective default and said investors were likely to recover 30 percent to 50 percent of the bonds' face value in a restructuring. A 30-day grace period for Belize expired yesterday.

The bond gained 0.55 cent to 34.85 cents today, the biggest advance since Aug. 27, according to data compiled by Bloomberg.

Bank of Nova Scotia and Citigroup Inc. say the government's 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.

"By showing good faith in paying the partial coupon, they show that they are not rogue borrowers," Carl Ross, who covers Central America and the Caribbean as a managing director at Oppenheimer & Co. in Atlanta, said in an e-mail message before Belize's announcement. The brokerage holds no Belize debt.

GROWTH OUTLOOK

The International Monetary Fund forecasts Belize's economy will expand 2.8 percent this year after growing 2 percent in 2011, compared with 4 percent growth for Central America.

About 35 percent of the country's population lives in a dwelling without a flush toilet or refrigerator, according to a 2010 census.

Tourism and services accounted for 55 percent of gross domestic product in 2011. Manufacturing and construction made up 21 percent of the economy, while agriculture and fishing's contribution fell for a sixth consecutive year, to 11 percent, according to the central bank.

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S&P says Belize ratings unchanged after partial coupon payment

Standard & Poor's Ratings Services today said its 'SD' foreign currency ratings on Belize and its 'D' rating on Belize's bond due in 2029 remain unchanged following the government's partial payment of $11.7 million on Sept. 20. The government of Belize missed an approximately $23 million coupon payment due on Aug. 20, 2012. Although the terms of the 2029 bond include a 30-day grace period for interest payments, our ratings speak to full and timely payment. They also address debt exchanges that we view as distressed. By either measure, the government remains in default, based on our criteria. Rescheduling negotiations between the government of Belize and holders of the $547 million bond due in 2029 are ongoing. Once the likely rescheduling terms become clearer, we will publish our expectations for a postdefault foreign currency rating. Of the rated sovereigns that have emerged from default during the past 15 years, postdefault ratings typically have ranged from 'CCC' to 'B'.

Belize wins 60-day reprieve after partial payment
Debt-burdened Caribbean nation Belize has won a 60-day reprieve from bondholders after paying a portion of its overdue US$23m debt interest. It paid US$11.7m to creditors, earning it some breathing space and reducing the likelihood of a full-blown default, the BBC reported yesterday. Belize had been due to pay the US$23m bond interest payment, or coupon, on August 20.

A 30-day grace period to "cure" the missed payment ran out late on Wednesday, September 19. After the grace period ran out only 25 per cent of bondholders could have voted to accelerate the repayment of the entire bond, which was supposed to mature in 2029, according to a Financial Times report.

In return for Belize making a partial payment, the creditors' committee-chaired by AJ Mediratta, a partner of US hedge fund Greylock Capital Management-agreed not to seek "legal remedies" for a further 60 days to allow restructuring talks to continue. Negotiations are continuing.

S&P: Belize in default despite partial payment

The Standard & Poor's (S&P) ratings agency said late Friday that its selective default (SD) foreign currency rating on Belize and its 'D' rating on Belize's bond due in 2029 remain unchanged following the government's partial payment of US$11.7 million on Thursday.

According to S&P: "Although the terms of the 2029 bond include a 30-day grace period for interest payments, our ratings speak to full and timely payment. They also address debt exchanges that we view as distressed. By either measure, the government remains in default, based on our criteria. Rescheduling negotiations between the government of Belize and holders of the $547 million bond due in 2029 are ongoing.

Once the likely rescheduling terms become clearer, we will publish our expectations for a postdefault foreign currency rating. Of the rated sovereigns that have emerged from default during the past 15 years, postdefault ratings typically have ranged from 'CCC' to 'B'."

Belize won a 60-day reprieve from bondholders on Thursday after paying half an overdue interest payment, delaying any potential legal action and sidestepping a full-blown default. Belize paid US$11.7 million in interest to creditors as a 30-day grace period on its missed coupon payment expired, but bondholders said they were happy with the payment.

"The government's decision on the coupon payment was taken in consultation with the (bondholder) committee and we consider it a material and good faith step in the right direction," said AJ Mediratta of Greylock Capital Management, co-chair of the committee representing the majority of bondholders.

That show of goodwill prompted creditors to agree to refrain from taking legal remedies against Belize for 60 days, to allow restructuring negotiations on the US$550 million superbond to continue. "We view these latest developments in a positive light, as both parties seem to have begun negotiations in good faith," Nomura strategist Boris Segura said. "Let's see if 60 days is enough for a negotiation process that has not been smooth so far."

The government has laid out three proposals for rescheduling its bond payments, shocking creditors with its suggestion that they take a haircut of up to 45 percent on their investment. But now bondholders hope that an agreement that balances the interests of both parties could be reached in the near term, said Mike Gerrard of BroadSpan Capital, financial adviser to the committee.

The government of Belize missed an approximately US$23 million coupon payment due on Thursday. Although the terms of the 2029 bond include a 30-day grace period for interest payments, S&P said that its ratings speak to full and timely payment. Belize's government, which had said originally it did not have enough money to pay the interest on the bond, said in a statement it had agreed to a common framework with creditors to push along negotiations.

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Commentary: How I think my country Belize should deal with its foreign debt

I am a proud Belizean and American citizen, who is a veteran of these two beloved countries that has put his life on the line for both nations like thousands of other Belizean American citizens before and after me. Even though I have lived in the United States for many years, I still consider Belize to be my home because it is the country of my birth. My American citizenship could be revoked but my Belizean citizenship is solid like a rock.

There are about 300,000 or more Belizean Americans living in America and most of them feel the same way about Belize as I do. Our weekly contributions to our families in Belize are what keep the Belizean economy viable, as has been documented by all reputable financial agencies. Belize cannot survive without the involvement of Belizeans who live in the United States because they possess the most financial and human resources. Any Belizean who fails to accept this fact of life is living in a world of fantasy.

Yet, both political parties have failed to formulate a comprehensive benefit package to involve Belizean Americans so that they can invest their financial and human resources in Belize to make it a vibrant nation in this world. The current Prime Minister Dean Barrow had the right idea when he proposed Article 7 to amend the Belizean constitution so that Belizeans with dual citizenship could be entitled to run for office, represent Belize and do everything like all other Belizean citizens without giving up their American citizenship.

The People's United Party and a few selfish individuals within his own party were against this idea. However, they are giving away and selling Belizean citizenships to foreigners who now have more benefits, privileges and rights in Belize than natural born Belizeans. If the political parties in Belize continue to disrespect and disengage Belizean Americans in the political affairs of their country where they have a vital interest, Belizean Americans will eventually be forced to form their own political party in Belize to represent their interest and that will become one of the most powerful political party in Belize. They possess the financial and human resources that their fellow Belizean brothers and sisters in Belize cannot match.

In the ten years that the People's United Party was in power they borrowed about US$600 million dollars on behalf of the people and government of Belize. This money was not used to invest in the country's infrastructural, industrial, economic, technological and human development. They took all this money and spent it with their families, friends and political cronies. Plus, corruption was rampant in their administration. They acted as if Belize belonged to them and them alone.

In the year 2008, when the United Democratic Party took over the reins of government in Belize, the government was broke, unemployment was high, no significant industrial, technological, infrastructural and human development and an increase in the poverty rate. The UDP had to find ways and means to revitalize the nation's economy, pay the debt and bring back the country economically sound.

The government indicted the former Prime Minister Said Musa and Housing Minister Ralph Fonseca for the diversion of the Venezuelan money but due to some legal technicality the charges against these two men were later withdrawn. Charges were also brought against two other ministers, namely, Jose Coye and Florencio Marin Sr. for devaluing some government properties to buy for themselves then reselling them for higher prices. They were convicted but then appealed their convictions to the Caribbean Court of Justice (CCJ). In a landmark ruling, the court ruled that former ministers of government can be held accountable for acts they committed while they were members of the government.

To date I do not know if this government brought back these two ministers to court to get back the money for the people and government of Belize. The legal instruments are still available to the prime minister of Belize to look into how this debt was accumulated, look at how the funds were spent, disbursed and have these former elected representatives pay for the debt.

It is unfair for the poor citizens and our country to pay this debt, when many of those ministers are wealthier than when they first got elected into office, as was reported to the nation by one of their own disgruntled ministers, the former leader of the People's United Party John Briceno.

Our 31st anniversary of independence is not time to celebrate but to contemplate what we are going to do about our current state.

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Belize gets another 60 days to finalise bond payment

Belize has cleared half of the overdue interest payments to bondholders, who in turn have given the debt-ridden country another two months to clear the coupon payment.

Belize last week paid US$11.7 million of a US$23-million interest bill on its superbond.

In turn, the committee formed to negotiate on behalf of bondholders, Coordinating Committee of Belize Bondholders (CCOBB), indicated that it saw the payment as a sign of good faith and urged creditors to give Belize breathing space during the 60-day period.

"The committee is recommending that other bondholders refrain from seeking legal remedies during this period," said A.J. Mediratta, of Greylock Capital Management and co-chair of the Committee.

Belize was initially to make the interest payment on August 20, but got a 30-day reprieve to source funds

for what was the first interest payment on the restructured 2029 superbond.

It missed deadline of Wednesday, September 19, by about a day and was placed in "selective" default by ratings agency Standard & Poor's.

The US$544 superbond represents half of Belize's external debt.

Belize is reportedly seeking to restructure the superbond to extend its maturity to 50 years at a lower coupon rate of 6.5 per cent or two points lower than the current rate.

The BBC reported that a request that bondholders take a 45 per cent haircut on the bond was rejected.

The CCOBB said last week that conversations with Belize "are progressing towards a mutually agreeable restructuring of the bonds and both sides have identified an appropriate framework to advance negotiations".

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PM To IMF To Swing Major Loan Support
Prime Minister Dean Barrow left the country today for Washington DC - to lead a delegation into high level meetings with Executive Officials at the IDB and IMF. According to our information, the PM is going to lobby the IDB to give a partial guarantee to Belize's Superbond restructuring - a guarantee that is proving difficult to secure. The PM's visit is seen as the final push to try and swing the deal. The PM returns next Tuesday - and in his absence Deputy Gaspar Vega will act as Prime Minister.