Successful closure of super-bond exchange – S&P upgrades Belize

Aggregate face value is US $529.9 million

“We expect that Belize will continue to face a heavy debt burden…” – Standard & Poor’s, Mar. 20, 2013

Belize Minister of Finance, Prime Minister Dean Barrow, this morning announced that the Belize debt exchange offer has now “finally, legally, conclusively closed,” marking “a final successful consummation of this long-drawn-out process.”

Barrow said that the closure took place on Wednesday, March 20, 2013, “with the submission of all the relevant legal documentation.”

He confirmed a participation rate of 86.2% of bondholders; so, he said, consistent with the Collective Action Clause in the original bond agreement, all the bonds previously due to mature in 2029 are being exchanged for the new 2038 bonds.

In a statement released via the Central Bank of Belize on Wednesday, the Belize Government announced that “Belize’s 2038 Bonds will have an aggregate face value of US $529.9 million.”

White Oak Advisory LLP acted as the financial advisor, and Cleary Gottlieb Steen & Hamilton LLP acted as the legal advisor, to the Government of Belize in this transaction, while Citibank N.A., London Branch, served as exchange agent.

Barrow also announced today that as a consequence of the successful debt restructuring, Standard and Poor’s Ratings Agency has upgraded Belize’s ratings.

According to an announcement made by Standard & Poor’s, in a statement released Wednesday, “We are raising our long- and short-term foreign and local currency issuer credit ratings on Belize to ‘B-/B’.” Belize’s last ratings were held at “SD” or selective default for both foreign and local currencies.

“We are assigning a ‘B-’ senior unsecured foreign currency rating on Belize’s new proposed bonds due in 2038,” the statement detailed.

S&P went on to project a “stable” outlook for Belize, which, it said, “reflects our expectation that the debt exchange will moderate some medium-term fiscal pressure but that the government’s debt burden will remain heavy and economic growth prospects modest.”

Prime Minister Barrow noted that the ratings “have no real relevance for us,” since the government borrows primarily on a concessionary basis.

“We expect that Belize will continue to face a heavy debt burden, absent stronger medium-term GDP growth and fiscal consolidation,” said Standard & Poor’s credit analyst Kelli Bissett.

The debt exchange will reduce Belize’s gross general government debt to 71% of GDP in 2013 from 77% in 2011, Standard & Poor’s said.

“The stable outlook on Belize reflects our expectation that the completion of the debt exchange will moderately alleviate medium-term fiscal pressure,” said Ms. Bissett. “However, the government’s debt burden will remain large, and the country’s economic growth prospects will remain affected by infrastructure and a shortage of skilled labor,” she went on to add.