PM Barrow: ‘Superbond Two’ almost a done deal!

The restructuring of the U.S.$530 million “superbond” is almost over, and Belize—over the next ten years—will see cash-flow savings of almost $500 million, Prime Minister Dean Barrow said at Wednesday’s press conference, held at Biltmore Plaza Hotel.
Barrow, flanked by members of the Debt Restructuring Team, said that they expect the bond exchange offerings—which began in mid February—to close sometime between Friday and next Monday, thereby bringing to an end the year-long process.
Barrow said that as of last Friday, more than 86 percent of the bondholders accepted the new terms, which, in accordance with the bond’s collective action clause’s 75 percent threshold, effectively signals that the entire 2029 bonds will be exchanged for the new bonds due in 2038.
According to a statement from GOB, “Belize’s offer required tenders to be submitted to Citibank, in its capacity as the Exchange Agent for the transaction,” by 5:00pm on Friday, March 8.
Barrow also lauded the quantum of the savings that the restructuring has secured through the modified coupon (interest) rates: “In 2012 it’s $22 million, 2013 – $66 million, 2013 to 2017 – $236 million, and 2013 to 2022 -$494.”
The new terms have also saved the country almost $80 million that had accumulated between last August and February this year.
“Remember that we didn’t pay the coupon payment that had become due in August,” Barrow said. “We didn’t pay the coupon payment that would have become due in February ….. All together these are rolled up into the new bond and we thereby saved $76.4 million by way of these cash payments forgone.”
Barrow also pointed out that Belize’s current financing gap is approximately $84 million, but had the government failed, the $76.4 million would have had to be added, bringing the financial gap to more $160 million.
He also underscored the fact that his administration was able to complete the process without having to submit to any severe austerity plans that might have come from any international financial institution such as the Inter-American Development Bank.
“We think that is historic on any reckoning, and the fact that we have; with this relief, been able to avoid any kind of tax hikes,” he said.
The Prime Minister said that if 2012’s positive economic growth trend continues, the country “can actually see Belize’s debt to GDP ratio fall to perhaps 60% by 2017.”
Under the previous bond, the debt to GDP ratio for 2017 would have been closer to 70 percent.
The 2038 bond has secured a 10 percent principal haircut, which automatically shaves more than $100 million off the face value of US$530 million.
This represents significant cash-flow savings, although the 10 percent write-off is well below GOB’s original proposal for a 45 percent principal reduction, which it outlined in the Indicative Restructuring Scenarios documents that it published in August 2012.
The new interest rates will be set initially at 5 percent for the first five years—ending in September 2017—and will step up to 6.678 percent after 2017.
The government, Barrow said, also resisted some of the creditors’ demands so that the new terms do not provide for GDP warrants, which would have enabled the bondholders to increase the payments based on Belize’s GDP growth.
It does not include any consent fee, which would have been 1.25 percent of the bond’s face value, and it also excludes any provision for the granting of oil warrants.
Barrow also said that while the government did pay $1.5 million of bondholders’ committee expenses, it is a far cry from the $3.5-$4 million (USD) that the committee was demanding.
The new terms, however, have given the bondholders certain protections, including a “most-favored creditor” status, which means that GOB would not settle, by negotiation, any outstanding claim on better terms that what was offered to the holders of the superbond.
Barrow also raised the point that the most-favored creditor proviso has stirred the ire of the former owners of Belize Telemedia Limited, with whom GOB is yet to come to a final agreement on how much they are to be compensated.

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