Belize Nears Defaulting On Bond Payment

Belize has threatened to withhold a coupon payment due on a $547m bond this month, which could plunge the Central American country into formal default and casts a cloud over restructuring talks with creditors, the Financial Times reported. The bond maturing in 2029 is a product of a previous debt restructuring in 2006 and represents roughly half of Belize’s total public debt, according to the government. “We simply cannot afford this coupon payment given the financing shortfalls and other challenges we face,” Dean Barrow, Belize’s prime minister, said. “Our hope, however, is that we can move quickly towards a sensible restructuring of the instrument.” If the government fails to pay the coupon within 30 days of the due date on August 20 the country will be in formal default. This will complicate restructuring talks with international bondholders that are already under way. “The government is playing hardball with creditors,” said Edward Al-Hussainy, an analyst at Moody’s. “Saying they won’t make the coupon payment is a pretty aggressive move, and doesn’t give them a lot of time to restructure the bond before it goes into formal default.” Although the Belize government budgeted for the coupon payment in its recent draft budget for 2012-13, it also predicted a deficit of Bz$75.2m (US$38m), or about 2.5 per cent of the country’s US$1.5bn economy. After several step-up provisions, the bond pays an annual coupon of 8.5 per cent – meaning a $23m payment is due on August 20. The country presented three indicative restructuring proposals earlier this month, offering creditors a mix of haircuts, lower coupon payments and repayment extensions. Mr Al-Hussainy estimated that the scenarios could mean losses in effect of 70-80 per cent. Read more. (Subscription required.)