Espat to bondholders: “GoB will not reconsider”

The Government of Belize will not reconsider its rejection of Belize Coordinating Committee’s proposals, Leader of the Debt Review Team, Mark Espat, said Tuesday.

On Tuesday this week, the Committee issued a press release in which it said GoB’s rejection of the three counter-proposals, which the creditors sent on November 21, has jeopardized an opportunity for a timely resolution to the re-negotiation talks for Belize’s U.S. Dollar Step-Up Bond due in 2029 (superbond).

“We are surprised that the GOB has rejected the Committee’s proposal and only inched forward, when a timely agreement would be in the interests of all,” A.J Mediratta, of Greylock Capital Management, Co-Chair of the Committee, said.

Mediratta urged GOB to reconsider their proposals, and elucidated that “the debt relief at levels sought by GOB could only be justified with more tangible and objective signs of the country’s stated distress, such as the acceptance of an IMF [International Monetary Fund] program.”

Espat said, “The [Committee]’s premise that further debt relief can only be justified by greater fiscal consolidation or an IMF program is patently disingenuous.”

He said that were GoB to seek to increase its primary budget surplus projections from two to four percent as the Committee suggests, it would “entail retrenchment and tax hikes,” neither of which are options the government is willing to explore.

He added, “GoB did not ‘inch’ forward, … in fact, various investment bank/analyst reports issued since last week herald the significant improvement in GoB’s indicative scenarios.”

GoB’s latest Indicative Restructuring Scenarios, which it posted on the Central Bank of Belize (CBB)’s website last Thursday, offered two revised options to the bondholders. The first revised scenario asked for no reduction in the US$544 million, the bond’s principal amount; however, instead of the 8.5 percent interest, the government proposed 2.75 percent for the first five years, and 4.5 percent thereafter. This scenario suggested a 2052 maturity date.

The second option proposed a 33 percent principal reduction and asked for a 2042 maturity date, with 4.5 percent coupon interest rate for the first five years, and 6.75 thereafter. Both options asked for a mortgage-style payment plan.

The upgrades to the scenarios, Espat said, were due to the more optimistic growth rates for real Gross Domestic Product, which are estimated to reach by 3.3 percent and 2.3 percent in 2012 and 2013, respectively.

The government’s two revised scenarios was the response to the Committee’s confidential counter proposals.

According to government, while the Committee’s terms presented some short-term cash flow relief—at least one of which Mediratta said offered “debt service relief of more than [US]$150 million over the next 10 years”—all of them eventually returned to the 8.5 percent coupon interest rate.

Via last Thursday’s Ministry of Finance and Economic Development’s Memorandum, the government said that it “considers it [The Committee’s proposals] to be wholly incompatible with its objective of placing the country’s debt burden on sustainable footing—a goal that the Committee itself has indicated it is committed to at various stages.”

The bondholders’ 60-day grace period, during which they agreed to not pursue any legal remedies, expired on November 20; and the Committee announced that it has since engaged the “law firm of Arnold & Porter LLC to act as its legal counsel.

The Committee represents over US$338 million of the outstanding $544 million of the bonds, and is comprised of Greylock Capital Management, LLC; Steadfast Insurance Company; Capital Markets Financial Services, Inc.; the Trinidad & Tobago Unit Trust Corporation; and an Ad-hoc Group of 20 institutional members.




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