Archive for November, 2016

Belizean Government to restructure Superbond to avoid Economic default

Monday, November 21st, 2016

In order to avoid a chaotic default early in 2017, the Government of Belize is urgently trying to restructure its billion-dollar debt arrangement, a Superbond that expires on 2038.

A team consisting of Prime Minister and Minister of Finance Right Honorable Dean Barrow, Financial Secretary Joseph Waight, and Economic Ambassador Mark Espat travelled to New York City, USA, to meet with the Government’s legal and financial advisors. From November 7 to November 12t, the group met with key personnel from Citigroup Global Markets Inc., Cleary Gottlieb Steen and Hamilton LLP, to work on a new round of negotiations to ease payments on the debt.

The Belizean Government urged bondholders to form a creditor committee before the end of November so as to agree to a restructuring of the debt. This amendment on the Bond, sought the reduction of Belize’s public debt expense through lower interest rates. Another suggestion tabled to the advisors was the possibility of extending the life of the Superbond beyond the expiration date of 2038.

Despite the fact that the jurisdiction is experiencing serious financial difficulties, it must meet external debt payments. The next payment to the Superbond is due on February 2017, so it is hoped that a restructuring happens as soon as possible in order to secure this guarantee.

According to Prime Minister Barrow, the meetings in the USA were preparatory before notifying bondholders and the public what it is expected of the restructuring.

Another cause for concern is Belize’s 2:1 exchange rate peg with the US dollar being affected. The Central Bank of Belize announced a couple weeks ago that the country’s foreign reserves were currently around USD 315 million. The international benchmark for exchange rate sustainability requires Belize to keep its foreign reserves at USD 300 million and above. Falling below this benchmark will result in the Belize dollar being devaluated.