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Belize launches $565 million bond on international market

The Government of Belize today launched its biggest bond offering on the international market, in which it is trying to exchange the country’s outstanding commercial debt for the new U.S. dollar bonds. Belizean legislators approved the billion-dollar-bond offer (estimated at US$565 million) about a week ago.
 
According to GOB, the new bonds mature in 2029. Equal semi-annual principal amortizations won’t commence until 2019, but interest has to be paid from the on-set.
 
A step-up coupon structure applies. Annual interest payments for the first three years after issuance of the new bond would be made at 4.25%. The rate increases to 6% for years four and five, and increases another step to 8.5% in year seven through to maturity.
 
A release issued by the Government on Monday, December 18, quoted Prime Minister, Hon. Said Musa, as saying that, “Over the next five years, this transaction will save an estimated [US] $301 million in debt service costs for Belize in comparison with existing terms.”
 
Currently, Belize has 6 bonds ranging in size from US$3.4 million to US$125 million with interest rates ranging from 8.95% to 9.75%. The last of these expires in 2015. In all, Government’s debt is US$1 billion, and 93% of this is owed to foreign creditors.
 
“Belize’s stock of external commercial debt is visibly unsustainable,” Musa was also quoted as saying. “Through this transaction, Belize will have consolidated the debt into a single new series of bonds, improved liquidity for the creditors, stretched out maturities and significantly lowered the average rate of interest on the debt.”
 
According to GOB, the exchange offer was preceded by four months of intensive consultations with the affected creditors.
 
Hon. Mark Espat, Minister of National Development of Belize, who led those consultations, said, “This operation has been carried out with a strict adherence to the principle of transparency and respect for inter-creditor equity. We have worked in a cooperative manner with our creditors and we look forward to their strong support for the transaction.”
 
Tenders by the creditors are due not later than January 26, 2007, and the transaction is expected to close and the new bonds issued in the third week of February 2007.
 
GOB’s financial advisor for this bond offering is the international investment bank, Houlihan Lokey Howard & Zukin.
 
 
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