Belize Proposes Restructuring Scenarios

The government of Belize has put forth indicative debt restructuring scenarios including haircuts and maturity extensions for discussion with holders of 2029 “super bonds,” puzzling and spooking analysts. The government contemplates one scenario with no reduction of principal, a 15-year grace period, a 2% coupon and final maturity of 2062. A second sees 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 would entail a 45% haircut, 5-year grace period, 3.5% coupon, and mature in 2042. “Overall, the government’s strategy is puzzling. On one hand, they are going through the motions in consulting with bondholders and making their case for a restructuring. On the other hand, the lowball offer will undoubtedly anger all bondholders, who would lose tremendously if they participated in such an exchange,” Scotiabank says. The proposed restructuring terms would close the financing gaps facing the country in a sustainable manner, the government says, after the government on March 19 issued a public statement announcing the commencement of a comprehensive and urgent review of its external public sector debt and contingent liabilities. “The three proposals have combinations of haircuts and coupon reductions that go beyond our worst fears. In our view, the short notice of this proposal sounds more like a threat of a credit event than a willingness to negotiate,” Citi says. The shop adds it would not be surprised if the government decides not to pay the full 8.5% coupon rate if no agreement is reached before August 20. An ad-hoc group of at least 10 bondholders representing approximately $200m formed a steering committee last month to engage the government, amid initial talk of restructuring. S&P downgraded Belize’s long-term sovereign ratings to CCC+ from B minus after the country’s Prime Minister Dean Barrow raised debt service as an election issue. Moody’s has downgraded Belize’s credit rating to Ca fro