Belize Skips Payment, Enters Grace Period

The government of Belize has entered a 30-day grace period following failure to make a $23m coupon payment due Monday. “By defaulting on the bond, we believe the government is forcing bondholders to make a difficult decision between holding out, litigation and hoping to get paid sometime down the line, or simply cut their losses and accept whatever payment the government has to offer,” JPMorgan says in a research report. An ad-hoc bondholder group formed in response to the situation, now said to include at least 30 holders representing $275m of the $543.9m outstanding of the 2029 “super bonds,” is weighing all options, according to a source familiar with its plans. As a precursor to any negotiations, the group will request of the government to make its debt sustainability analysis (DSA) public, so as to avoid a repeat scenario seen in Argentina’s sovereign debt restructuring in which the sovereign introduced aggressive restructuring terms to bondholders without disclosing a framework and analysis of the sustainability of its total public and external debt as reviewed and undertaken by the IMF, the World Bank and the debtor. The government released August 10 three possible restructuring scenarios involving haircuts and maturity extension, but has not indicated if it will pursue any of them. The bonds were trading at 29-37 Monday, according to an investor.