Belize Inches Closer to Default

Belize is unable to make a $23.1m coupon payment on its $543.8m outstanding in 2029 “super bonds” scheduled for August 20, the government says, moving the situation closer to a default and possible decision to accelerate by its bondholders. “We simply cannot afford this coupon payment given the financing shortfalls and other challenges we face. Our hope is that we move quickly toward a sensible restructuring of the instrument,” Prime Minister Dean Barrow says in a statement. The government says restructuring scenarios proposed last week would close its financing gaps in a sustainable manner. The bonds include a 30-day grace period on all interest and principal payments, after which a credit event or default could be declared, and bondholders could accelerate the bond. “They have plenty of money in foreign exchange reserves and budget account to pay the coupon. But if they choose not to, it sends a harsh signal to the market and takes the restructuring to a more adversarial realm,” says an investor following the situation. “We are sympathetic to the challenges facing Belize. However, we do not consider the indicative scenarios released last week as the start of negotiations,” says an ad-hoc bondholder group formed in response to the situation, now said to include 30 holders representing $275m. Restructuring scenarios were released despite an absence of material information necessary to evaluate the country’s debt sustainability, the group adds. Possible debt restructuring scenarios divulged last week include haircuts and maturity extensions. A first scenario entailed no reduction of principal, a 15-year grace period, a 2% coupon and final maturity of 2062. A second saw a 45% haircut, no grace period, and a coupon of 1% through 2019, 2% through 2026 and 4% through a 2042 final maturity. A third included a 45% haircut, 5-year grace period, 3.5% coupon, and mature in 2042. The government has not made any indication as to whether it would pursue any of the three. “A cred