Bondholders reject latest Belize restructuring offer

BELMOPAN, Belize, Wednesday December 5, 2012 – Bondholders have rejected a new offer from the Belize Debt Review Team on the restructuring the country’s US$544 million “super bonds” scheduled for maturity in 2029.

The bondholders say they have also hired lawyers since a 60 day reprieve on legal action has expired. Bondholders had agreed not to pursue legal action for 60 days after Belize paid half of the US$23.5 million interest payment due in August. But the grace period has now expired.

Last week, the Belize government presented new counter-proposal to the bondholders and according to an official statement, the counter-proposal puts forward alternative scenarios all of which the government says offers only “temporary reductions in the current coupon rate with modest extensions in average life”.

These alternative scenarios include temporary reduction in the coupon rate and an extension in the average life of the bond; a return to the 8.5 per cent coupon rate at the expiry of the reduced coupon period and a series of “Required Terms” which includes “GDP (Gross Domestic Product) warrants and oil recovery certificates,” and the payment of what’s called consent fees to participating creditors.

The Barrow administration’s proposal was in response to an earlier counter offer by the bondholders.

The government said that the proposed return to the current 8.5 per cent coupon rate “is designed to be no worse than NPV neutral once the combined effect of the Required Terms is factored in”.

The government also indicates that while the bond holders counter offer offers some short-term cash flow relief, the counter proposal is “wholly incompatible with its objective of placing the country’s debt burden on a sustainable footing.

“The government of Belize believes that the counter-proposal ignored Belize’s high overall debt levels, and that it amounts to little more than a short-term fix not dissimilar to the 2007 exercise,” according to the official statement.

A  committee set up to represent bondholders said the new proposals from the government still fell short and that they have hired law firm, Arnold & Porter to act as their legal counsel.

While Belize says it cannot afford to meet rising interest payments on the bond, the bondholders say they cannot accept a haircut of up to 45 per cent.

According to AJ Mediratta, of Greylock Capital Management, co-chair of the bondholders committee, they “will be spending the next few weeks evaluating its options, but remain strongly committed to a good-faith collaborative process and will make itself available to the (government of Belize) as required.”

The revised offer included a lower haircut of 33 percent and an initial interest rate of 4.5 per cent that would step up to 6.7 per cent after five years, more than the 3.5 per cent interest Belize originally proposed. (CMC) Click here to receive free news bulletins via email from Caribbean360. (View sample)