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Clock ticks on Belize Superbond default

By Benjamin Flowers
Staff Reporter

The countdown for Belize to default on its scheduled coupon payment of the 2038 US dollar bonds (Superbond) began this week after the government failed to make a US $13.3 Million payment, which was due on Monday.
On Monday, the Government of Belize announced that it didn’t meet the coupon payment, but noted that it was still not officially in default. GOB said that even though the payment was due on Monday, February 20, the terms of the bond allow for a 30-day grace period on the payment.

GOB said that it had only “deferred” the payment, pending the results of its restructuring efforts through a consent solicitation with the bondholders. GOB has proposed that bondholders lower the interest rate on the bond from 5 to 4 percent and that amortization payments be pushed back way until 2036 when GOB proposes it will start making three annual payments upwards of $100 Million each.

Sources have indicated to the Reporter that GOB will most likely continue to extend its consent solicitation and try to sweeten its offer to bondholders in the hopes of reaching an agreement before Belize officially defaults on the bond. During the 30-day grace period, GOB can attempt to make a partial payment but bondholders also reserve the right to decline partial payment.

If Belize does default on the bond, according to a Principal Reinstatement Clause stipulated in the last round of restructuring in 2013, Belize will have to issue 11.11 percent of the original principal amount of the shares, totaling some US $59 million, and due five days after the default has been declared.
Prime Minister Dean Barrow returned to Belize last Sunday following meetings with the government’s financial advisors and bondholders in New York.

Barrow said that after an extensive meeting, GOB has amended its proposal and has emerged with its final position with respect to an offer for the bondholders. He said that he felt the renegotiations could be concluded before the end of the grace period.

GOB is attempting to restructure the bonds, because the Central Bank of Belize’s foreign reserves are critically low. Apart from the Superbond, GOB also owes over US $50 Million to Michael Ashcroft in arbitration awards, won in Arbitration Courts in London and upheld by courts in the US.

Coupled with the Superbond payments, GOB paying those awards would put the reserves below the merchandise imports sustainability bench mark, which would compromise Belize’s currency peg to the US dollar, and could ultimately lead to devaluation. Ashcroft, in an interview given to Channel 5 this week, said the he is and has always been willing to settle with GOB on the arbitration awards.

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