BELMOPAN, Belize, Monday, September 24, 2012 – Belize has paid holders of a 2029 bond US$11.7 million of the $23 million that they are owed.
This has brought some measure of confidence to the international investment market as investors in Belize were thrown into confusion after Belize missed the US$23 million payment on August 20 and then failed to make any payments on the US$544 million debt issue during the 30-day grace period that expired on September 19.
The uncertainty in the market was not helped by Standard & Poor’s lowered the rating on Belize’s sovereign debt to selective default and suggesting that investors were likely to recover 30 percent to 50 percent of the bonds’ face value in a restructuring.
However, according to data compiled by Bloomberg, the bond gained 0.55 cent to close at 34.85 United States cents after the payment, the biggest advance since August 27.
The payment has now won Belize a 60-day reprieve from bondholders. Major creditors have reportedly agreed to refrain from taking legal remedies against Belize for 60 days, to allow restructuring negotiations on the US$550 million superbond to continue.
“The government’s decision on the coupon payment was taken in consultation with the (bondholder) committee and we consider it a material and good faith step in the right direction,” said AJ Mediratta of Greylock Capital Management, co-chair of the committee representing the majority of bondholders.
“We view these latest developments in a positive light, as both parties seem to have begun negotiations in good faith,” Nomura strategist Boris Segura said. “Let’s see if 60 days is enough for a negotiation process that has not been smooth so far.”
The government had laid out three proposals for rescheduling its bond payments, which did not go down well with creditors after it was revealed that they would likely take a haircut of up to 45 percent on their investment. However, bondholders are hoping that an agreement that balances the interests of both parties could be reached in the near term, said Mike Gerrard of BroadSpan Capital, financial adviser to the committee.