Belize unable to pay bondholders, seeking extension

BELMOPAN, Belize, CMC –The Belize government has formally informed bondholders that it will not be able to make a scheduled US$7 million coupon payment to its international bondholders that was due on Thursday.

Belize is looking to restructure a US$550 million Superbond that emerged from 2006-07 restructuring and now contributes to a 133 per cent debt to gross domestic product (GDP) ratio that the International Monetary Fund (IMF) deems unsustainable.

A government statement noted that it is seeking the consent of the bondholders to have the payment deferred to September 19 this year “with the effect that the amended grace period will expire on the same date as the grace period applicable to the next schedule coupon, payable on August 20, 2021”

The statement said that the country's economy and financial conditions have been acutely affected by the consequences of the coronavirus (COVID-19) pandemic.

It said that the primary deficit increased to 8.3 per cent of GDP in the fiscal year 2020-21 from 1.4 per cent of GDP in the previous fiscal year.

“In addition, the government's current projections indicate that the primary balance could fall to a deficit of 2.8 per cent for the fiscal year 2021-22,” the statement said, quoting a media release by the IMF team that carried out an assessment of the country's economic situation.

The IMF team had indicated that Belize is not expected to return to its 2019 level until 2025.

The government said that following extensive stakeholder consultations, Belize is implementing a five-year home-grown recovery programme that started with this year's national budget.

“As a result, the government has implemented aggressive fiscal adjustments measures and commenced consultations and discussions with advisers, bondholders and other parties regarding possible alternative terms for meeting its contractual obligations under the bonds.

“The government is seeking consent from the eligible holders to the proposal amendment in order to give the government the necessary time to discuss these alternatives with representatives of the holders and execute an appropriate transaction.”

Belize said that it will pay each eligible holder that delivers a consent in accordance with the procedures prescribed in the Consent Solicitation Statement “a consent fee in an amount equal to US$0.50 cents for each US$1,000 principal amount of securities held by such eligible holder provided that Belize receives the Requisite Consent and the proposed Amendment become effective.

“Holders of bonds for which no consent is delivered will not receive such consent fee,” the government statement said, noting that the “Consent Solicitation will expire at 5:00 p.m.  New York City time on June 1, 2021 unless extended or earlier terminated by Belize”.

Last week, the Reuters reported that Belize's bid for its fifth debt restructuring in 15 years is threatening to turn sour as holders of its so-called 'Superbond' urged it to agree to an IMF programme.

The news agency reported also that Superbond holders, US-based funds GMO and Greylock and London-based Aberdeen Standard Investments, which recently rebranded as ABRDN, have formed a creditor committee and are signalling they may not restructure without IMF help.

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