The successful restructuring of the US$547 million super-bond by the Government of Belize has triggered Moody’s Investors Service to upgrade Belize’s government bond rating from Ca to Caa2, adding that the rating outlook is stable.
“The upgrade balances an improvement in the government’s liquidity position following a pre-emptive restructuring of its external commercial debt, against a debt overhang that was not cured by the default and continues to impair Belize’s credit solvency,” the agency said.
Moody’s added that, “The distressed debt exchange concluded Belize’s second default since 2006.”
It cautions that, “While the restructuring should provide temporary liquidity relief, we see it as insufficient in addressing Belize’s debt overhang.”
Last month, Standard & Poor’s, another international ratings agency, announced right after the new bond offer closed that, “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 S&P statement detailed, adding that it also projects a “stable” outlook for Belize.
S&P cautioned, though, that “…the government’s debt burden will remain heavy and economic growth prospects modest.”
Moody’s, in its statement this Monday, said Belize’s debt servicing capacity will likely decline as Belize’s limited oil reserves are exhausted.
It also said that, “Claims stemming from the nationalization of two utilities between 2009 and 2011, currently in litigation, could crystallize into fiscal liabilities large enough to trigger another default…”