Belize makes partial bond coupon payment

By Robin



Belize has made a partial payment on its $547m defaulted bond, earning it a temporary reprieve from mollified creditors who could otherwise have sought legal redress.

The small Latin American country was due to make a $23m payment on the bond on August 20 but failed to do so, arguing that its finances were too tight. A 30-day grace period to “cure” the missed payment ran out late on Wednesday.

After the grace period ran out only 25 per cent of bondholders could have voted to accelerate the repayment of the entire bond, which  due to mature in 2029.

In return for Belize making a partial payment, the creditors’ committee – chaired by AJ Mediratta, a partner of U.S. hedge fund Greylock – agreed not to seek “legal remedies” for a further 60 days to allow restructuring talks to continue.

“We consider it a material and good faith step in the right direction,” Mr Mediratta said in a statement. “The committee is recommending that other bondholders refrain from seeking legal remedies during this period.”

The committee represents a majority of the bondholders, so it will be difficult for a grouping of other creditors to still seek to declare a default and “accelerate” the payment.

The tentative agreement represents a rare moment of amicability in a testy restructuring.

Belize – which has an annual economic output of just $1.5bn – presented three indicative restructuring proposals last August. These offered creditors a mix of haircuts, lower coupon payments and repayment extensions, which would have meant overall writedowns.

Initial restructuring talks were tense, but the partial coupon payment on Thursday appears to have led to a more cordial dialogue. The partial coupon payment made was $11.7m, according to a person familiar with the matter.

Mike Gerrard of BroadSpan Capital, the creditors’ financial adviser, said: “The committee appreciates that discussions are proceeding in a constructive manner and we are hopeful that an agreement that balances the interests of the bondholders and [Belize] can be reached in the near term.”

The article was amended to make clear that Belize is already in default on its bond. The partial payment has only given it an extension to a grace period on legal action by creditors.

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