The Government of Belize presented the new Superbond agreement at a meeting of the House of Representatives today, Tuesday, in the National Assembly Building in Belmopan. The new bond motion, called the “Government of Belize External Debt Restructuring Motion, 2013,” encompasses in its payment schedule over BZ$1 billion and features lower interest rates and a longer maturity period than the current bond.
The new bonds are expected to be issued by March 31, 2013. The maximum transaction size of the Superbond is US$529,928,800. There are two set interest rates for the new Superbond. For March 20, 2013, to August 20, 2017, the interest rate will be 5.000 percent per annum and for August 20, 2017, to February 20, 2038, it will be set at 6.767 percent per annum. The new bonds will be repaid in equal semi-annual installments starting August 20, 2019. The final maturity date is expected to be on February 20, 2038. The first interest payment will be due approximately five months after the issuance date. The payments will be done semi-annually – at six months interval.
The PM said that the restructured Superbond has three key features; the first is that there is a 25-year maturity period which will expire in 2038. That constitutes an addition of nine years to the period of repayment that was set out for the current maturity bond, which was to expire in 2029. The second feature is that there is a 10 percent discount off the principal, which means that $108 million will be removed from the current Superbond debt. The third feature is that the initial interest rate coupon is for five percent lasting for four and a half years; stepping up then to 6.788 percent for the remaining life of the new bonds.
“Recollect that the present interest rate under the Superbond is 8.5 percent,” the PM said. “Therefore, the new initial interest rate represents a 41 percent reduction from the current Superbond interest rate. And the subsequent step-up interest rate represents a 20 percent reduction compared to the current 8.5 percent. There is a grace period of six years before principal repayments commence, even though the bondholders in exchange for the substantial relief argued for earlier principal repayment. Government of Belize was able to hold the line and 2019 continues to be the year when principal payments begin,” he went on to say.
It had already been made known to the public, prior to the House of Representatives meeting, that the GoB was successful in negotiating a restructuring of the current Superbond with the bondholders. On December 21, 2012, a press conference was held, with the bond negotiating team and Greylock Capital Management representative A.J. Mediratta announcing that the government had received a bond relief of $150 million dollars. Incorporated in the restructured bonds is the capitalization of interest that had grown from partial coupon payments the GoB made in late 2012.
“All interest will be capitalized and this actually amounts to 76.4 million dollars and had we not, as part of restructuring, been able to secure the capitalization of the interest, and remember we did not pay half of the last coupon payment and all that interest continued to accrue, if we had not been able to secure the capitalization of this $BZ76.4 million in interest, we would have had to pay that sum in cash in September of 2012 and February 20th of 2013,” the PM said.
The PM said that a very advantageous matter for the country is that Belize will pay only US$1.5 million of the creditor committee expenses.
“We will pay only one point five million U.S. dollars of the creditor committee expenses. Those expenses have been paid by the creditor committee as being in the range of BZ$8 million and the argument was that since we were the ones triggering the restructuring, we should pay all of the creditor committee costs. We refused to do that and we were able to in fact get the committee to accept US$1.5 million. The rest of the creditor committee cost will have to be borne by the bondholders themselves,” the PM said.
The PM said that the estimate of debt service reductions resulting from the new terms negotiated by the GoB are BZ$22 million in 2012; BZ$66 million in 2013; BZ$236 million during the five-year period of 2013-2017 and BZ$494 million during the 10-year period of 2013-2022.
“The deal we have negotiated [will] see us come out finally at a net present value [of] 56.75 cents on each super bond dollar or a reduction in net present value terms of over 43 percent,” he said.
While the GoB was pleased to announce the bond restructuring, the opposition was discontented. Leader of the PUP Hon. Francis Fonseca said that the GoB’s actions were done in secret and members of the Opposition said that they were disrespected by not being informed in a timely manner of the progress of the negotiations and the final Superbond terms that were agreed upon. Fonseca even mentioned that the opposition was not informed of the motion of the meeting until late Monday evening.
Fonseca expressed their “very strong objections to and disapproval of the manner in which the government, and the Prime Minister in particular, has managed this entire debt restructuring exercise.” “Their approach has been secretive, it has been arrogant, it has been reckless and it has been divisive. Absolutely no information, Mr. Speaker, has been shared at any point during this process with any member of the Opposition. In fact, the Prime Minister publicly boasted that he would not be sharing any information with the Opposition. He publicly declared his intention and offered an undertaking to support this intention at his press conference to have the renegotiating team appear before the Finance and Economic Development committee of the House of Representatives to brief that committee on the progress of the restructuring exercise. But like so many of the promises and commitments made by this Prime Minister over the past five years this turned out to be just empty press conference rhetoric. He never intended to keep that commitment and he has not kept that commitment,” Fonseca said.
The new bonds details are to be reviewed by the Senate on Wednesday, February 13, 2013.