The terms for the re-negotiated US$544 million “superbond” were presented to the House of Representatives Tuesday, where Prime Minister Dean Barrow announced principal savings of more than BZ$100 million.
Barrow said, “There is a 10 percent principal haircut off the top, so immediately approximately BZ$108 million dollars is to be written off the current super bond indebtedness.”
He explained the modifications to the bond’s 8.5 percent coupon (interest) rate has resulted in even more cash-flow savings.
The initial coupon rate is for 5 percent for the first four and half years. This will step up to 6.788 percent for the remaining life of the new bonds.
Barrow said the estimated debt “service reductions” resulting from the new terms negotiated by GOB are … BZ$22 million in 2012; BZ$66 million in 2013; BZ$236 million during the 5-year period 2013-2017 and BZ$494 million during the 10-year-period 2013-2022.”
He went on to say that the new deal will result in at a net present value of “56.75 cents on each super bond dollar or a reduction in net present value terms of over 43 percent.”
The new bonds will mature over a 25-year period.
The new bond agreement sets the maturity date to the year 2038, making it nine years more than the original super bond, which was to expire in 2029.
He explained that the final terms were hammered out late Monday afternoon, as the government’s negotiating team and bondholders’ attorneys worked the phone lines between Belize and New York to arrive at the final figures that the Prime Minister introduced in the government’s motion.
Barrow added that the agreement also includes a waiver of the interest owed to bondholders up to September 2013 from last August’s interest payment, of which only half was paid. That amount will be capitalized, thereby, resulting in additional savings of $76 million.
Also, in late November 2012, the bondholders’ had issued counter proposals to Belize’s original offer, and had asked for several value-added incentives such as oil certificates or GDP warrants. Barrow announced that no such value-added incentives will be given.
If those had been given, bondholders would have gotten a cut of future oil revenues, or a slice of the GDP if it grew beyond a certain level.
The new Belize bonds will be launched on Friday, and it needs 75 percent of the bondholders to buy in for it to work and activate the collective action clause that would obligate the remaining bondholders to go along with the terms.
Barrow also underlined his government’s determination to secure the new terms.
“Even at the price of losing the partial IDB [Inter-American Development Bank] guarantee that we sought, this government resisted the proposal/proposition of an IMF program, notwithstanding the pressures brought to bear on us by the US Treasury by the IMF itself and by the other international financial institutions,” Barrow said.
“This would have surrendered Belize’s fiscal and monetary independence and would have meant higher taxes and public service coffers,” he continued.
But when it was time for the debate on the motion, Opposition Leader Francis Fonseca castigated Prime Minister Barrow on the negotiations, for what he said was the government’s secretive approach.
Fonseca said that the government has been arrogant, reckless and divisive.
“Absolutely no information Mr. Speaker has been shared at any point during this process with any member of the Opposition. In fact, the Prime Minister publicly boasted that he would not be sharing any information with the Opposition, Fonseca declared, adding that the Prime Minister was disrespecting half of the country.
“We meet this morning to authorize the issuance of new bonds valued at over $1 billion and the Opposition is sent the bare text of the motion at 5pm yesterday,” Fonseca said.
He also said that with the new terms “the moaning of the last 5 years about the super bond is over. No more crying Mr. Prime Minister. No more excuses.”
Responding to the Leader of the Opposition remarks, Barrow asked: “Where was the transparency when you contracted that UHS debt? When the ex-Prime Minister signed the guarantee that nobody knew about witnessed by the then Attorney General (who is now) the current Leader of the Opposition – where was the transparency then? Where was the respect?”
He added: “I will plead guilty, I will gladly plead guilty, I will proudly plead guilty to the fact that we did not keep them (the PUP’s) abreast because … if we had done so it would have meant that we would have been sharing critical details with, quite frankly in terms of this process, the enemy or at least the consort or the hand maiden of the enemy.”