Restructuring talks “progressing towards a mutually-agreeable restructuring,” says committee of bondholders

“the Committee has agreed not to seek legal remedies for a period of 60 days”

BELIZE CITY, Fri. Sept. 21, 2012

On August 20, 2012, the Barrow administration failed to meet the US$23 million coupon payment towards the US$544 million super-bond, due to mature 2029, making the case that it was because the interest rate had stepped up to an onerous 8.5%. The Government of Belize had on August 8, 2012, proposed to bondholders three alternative debt payment scenarios, two of which include a 50% reduction in principal and all of which envision a much lower interest rate.

However, bondholders did not respond favorably, and the Government of Belize later issued a statement saying it simply can’t afford to make the programmed payment.

Since then, relations have been tense between the Government of Belize and a committee representing the majority of bondholders, but a breakthrough was announced on Thursday, September 20—a day after the 30-day grace period expired and Belize again failed to pay the US$23 million.

“A partial payment of [US]$11.7 million, which amounts to approximately 50% of the interest payment due to the holders, will therefore be effected [today],” said an announcement from the Government of Belize.

As Amandala had reported in this weekend’s Sunday edition, there had been discussions that Belize would make a part-payment in exchange for an extension of the grace period to meet the full payment. However, Belize does not just want an extension of the deadline – it wants entirely new terms for the loan.

The announcement by Belize that it would make part-payment was welcomed by the committee of bondholders, which deems it as “a material and good faith step in the right direction.”

“In turn, the Committee has agreed not to seek legal remedies for a period of 60 days in order to provide additional time for the parties to conclude negotiations on the restructuring,” said Ajata Mediratta, of Greylock Capital Management, LLC, co-chair of the committee of bondholders, in a statement coming out of New York on Thursday, September 20.

“The Committee is recommending that other bondholders refrain from seeking legal remedies during this period,” added Mr. Mediratta.

Talks “progressing,” “constructive”

According to the committee, talks are “progressing towards a mutually-agreeable restructuring” of the super-bond. It added that “both sides have identified an appropriate framework to advance negotiations.”

“The Committee appreciates that discussions are proceeding in a constructive manner, and we are hopeful that an agreement that balances the interests of the bondholders and the GOB can be reached in the near term,” said Mike Gerrard of BroadSpan Capital, financial advisor to the Committee.

The committee said that it has agreed to enter into a limited confidentiality agreement with GOB, in order to facilitate the negotiations on a restructuring of the bonds.

GOB says that the parties are trying to reach “an understanding regarding a restructuring of the instrument, consistent with Belize’s debt servicing capacity.”

It added that the parties have identified a common framework to advance negotiations, including a workable approach to accounting for the effect on Belize’s debt servicing capacity of certain other liabilities of the Government.

Belize “default” rating stands

Meanwhile, Standard and Poor’s ratings agency said Friday that its “SD” [selective default] foreign currency ratings on Belize and its “D” [default] rating on Belize’s bond due in 2029 remain unchanged following the government’s partial payment made Thursday.

“Although the terms of the 2029 bond include a 30-day grace period for interest payments, our ratings speak to full and timely payment,” the agency said. “They also address debt exchanges that we view as distressed. By either measure, the government remains in default, based on our criteria.”

Standard and Poor’s acknowledged the ongoing debt restructuring talks, saying, “Once the likely rescheduling terms become clearer, we will publish our expectations for a post-default foreign currency rating.”

Belize can rebound from its current ratings position. S&P said that those rated sovereigns that have emerged from default during the past 15 years have received ratings ranging from ‘CCC’ to ‘B’.