BELIZE CITY. Mon. June 7, 2021– The country is seeking to obtain a “haircut” from the bondholders to aid in its homegrown plan of recovery. At this time, according to Prime Minister John Briceño, at least 45 cents of every dollar allocated for debt servicing is currently being forfeited to the bondholders to cover interest on the debt alone. The Superbond accounts for 28% of the country’s total debt and 97% of its commercial external debt. This morning, during an interview on Channel 5’s morning show, Open Your Eyes, Prime Minister Briceño remarked that the country cannot continue down this unsustainable path.
The negotiations between the government of Belize and the holders of the 550-million-dollar Superbond are still ongoing, although tenuous. The country extended the deadline by which the bondholders are expected to indicate whether they will extend the grace period for the most recently due payment on the bond, to Friday, June 11. This was done in an amendment of the Consent Solicitation delivered to the bondholders.
He commented that the apparent insistence of the bondholders to play hardball with Belize is ill-advised and could only result in a financial loss for them. “The bondholder, they can play hardball, that good for them; that’s fine by them, but where will that put them? Now that they have started to play hardball, the price of the bonds has gone down to about 30 cents on the dollar. So, they are shooting themselves in the head,” he said.
The Prime Minister said that it would be in the best interest of the bondholders to opt to enter into renegotiation with the government in good faith, since their options for recovery of the amount owed to them are limited.
He added, “Belize is not going to borrow on the capital markets. We have no intentions of doing that. Secondly, their legal recourses are limited. They can’t take us to court; we don’t have assets outside of the United States, so the only way they can try to raise the price of that bond is by sitting down and having a reasonable negotiation with us where we are saying that in good faith, that the level of debt in Belize is unsustainable. The article 4 (IMF) report has said that, yes, that we are correct, that it is unsustainable. The Superbond, while it is 28% of the entire debt, the interest we are paying [is] about 45 cents of every dollar to the superbond. Their interest rates are the highest. So, we simply cannot and will not continue to pay the superbond the way it is. We have to sit down and negotiate as it is, and the longer they take, the lower the price of the Superbond would go down.”
According to Reuters, the bond traded as low as 32.5 cents on April 22 before increasing slightly to 39 cents.
With a debt-to-GDP ratio of 133%, the country is trying its best to implement its homegrown plan of recovery before the financial situation worsens. A part of the plan is to finalize the renegotiation of the bond, a renegotiation in which GOB anticipates a sizable haircut that has already been accounted for in this year’s budget that was presented by the Briceno administration.