Bondholders: Belize’s most-favored creditors

The newly re-negotiated terms for US$548 million “superbond” offer protection to the bondholders that, among other provisions, make them Belize’s most-favored creditors.

According to Debt Review Leader Ambassador Mark Espat, the most-favored-creditor provision lets the bondholders know that “GOB will not settle, by negotiation, any other outstanding claim on better terms than it has offered holders of the super bonds.”

This provision is only one of four protective, non-economic terms highlighted in the Belize Coordinating Committee’s press release issued on Tuesday this week.

The New Bonds also guarantee “bondholders committee engagement”, which, according to Espat, represents a commitment from GOB “to recognize and to engage with a Creditor Committee in the event of a future default.”

Third, the bondholders’ release also alluded to a contingency account for trustee indemnification. Espat explained that that provision would come into effect in the case of any future default.

If there is a default, The Bank of New York Mellon—the trustee for the new bonds— would then be able to access a pre-funded contingency account in order to act on behalf of bondholders, and, if necessary, pursue any legal remedies as may be available. Espat added that the contingency fund is funded by bondholders and not by the Government of Belize.

The new terms also speaks to principal reinstatement in the event of a future default. “Should Belize default at any point during the next 10 years,” Espat said, “and the requisite proportion of bondholders opt to sue the issuer [GOB], then they would be able to claim the full amount of their principal [amount].”

He added that under such circumstances the bondholders would then be able to claim even the principal amount for the superbond that they have “currently agreed to write off.”

As of Tuesday this week, the Belize Coordinating Committee—a group that represents $338 million (62 percent) of the bonds—issued a press release in which they stated that “all of its members have agreed to tender their Old Bonds in exchange offer.”

The new bonds have a maturity date in the year 2038, which is nine years more than the 2029 maturity date for the “Old Bonds”.

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