Belize to Restructure Debt
Belize’s debt has been already discussed previously as regards its measures to control debt with the help of the consultations of the IMF and as regards reducing a deficit of GDP, Belize’s necessity to restructure its debt and international ratings agency’s Standard & Poor’s lowered ratings. Well, this is the continuation of the topic.
Recently, the Government has announced its intention to look for the approval of the Belizean National Assembly for the financial terms of an offer to exchange most categories of Belize’s outstanding external commercial indebtedness for new USD Bonds. If the National Assembly approves the exchange offer, it will be formally launched already in December.
The above-mentioned announcement was made just before Standard & Poor’s revised foreign currency sovereign credit rating of Belize to selective default (“SDâ€) on December 7, 2006. Also, Standard & Poor’s revised its long-term foreign currency ratings to “D” on its rated bonds.
The action of Belize’s government comes after 4 months of intensive consultations with the financial advisers with the affected creditors.
According to the government, the financial terms for which approval is being sought are based on economic data and forecasts published by the International Monetary Fund (IMF) as part of Belize’s most recent Article IV Consultation, as well as on account of the opinions expressed by creditors during the period of consultations.
The Government hopes for National Assembly approval for the issuance of New Bonds to mature in 2029, with principal payments commencing in 2019. The New Bonds are planned to bear interest in the first 3 years after issuance at a fixed annual rate of 4.25%. In years 4 to 5, the rate will increase to 6%, and thereafter through the maturity of the New Bonds the interest rate will level off at 8.5% per year. All coupons are to be paid in cash on their respective due dates. The terms of the exchange offer would provide that participating creditors receive cash payments at the closing of the transaction equal to unpaid interest on their tendered claims accrued through the closing date. Accordingly, interim debt service payments on the existing debts eligible for the exchange offer will cease immediately.
Belize has needed to restructure its debt despite the government’s savage fiscal cut-backs which cut a deficit of 9% of GDP to 3% in just 2 years in accordance with the IMF. As for now, Belize has 6 outstanding international bonds totaling USD 338 million and USD 253 million in commercial loans, while USD 116 million is accounted for by domestic debt.