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Belize Rejects Restructuring Offer on $544 Million Superbond

Nov. 29 (Bloomberg) -- Belize rejected a debt restructuring proposal by creditors holding more than half of a $544 million defaulted bond three months after the government missed a coupon payment.

Belize rejected the bondholders’ Nov. 21 restructuring proposal, which is “wholly incompatible” with the country’s objective to make its debt sustainable, according to a statement posted on the central bank’s website today. The Central American country paid creditors $11.7 million Sept. 20, about half of the $23 million coupon payment it failed to make Aug. 20.

“The government views the recently-submitted scenarios as unsustainable, and is disappointed that a counter-proposal of this nature has come five months after discussions with the Committee began,” according to the statement.

In response to the bondholders’ proposal, Belize countered with two debt restructuring scenarios. Belize’s counter proposals would reduce the coupon rate payment on the so-called superbond and provide a grace period of five to 10 years.

‘Alternative Structures’

The government said it will seek feedback from bondholders’ on the presented scenarios and “remain open to discussing alternative structures.”

“It seems like bondholders and the government still remain far apart with regards to acceptable terms,” said Joe Kogan, head of emerging-market strategy at Scotia Capital Markets. “The government has revised some assumptions and improved on its previous offer. That previous offer was very aggressive, however, Belize’s growth of 7.4 percent in the first half of 2012 makes it even harder for Belize to justify the haircut they were requesting.”

Scotia estimates that the government’s new offer is worth roughly 35 cents on the dollar, up from 20 cents previously, Kogan said in a research note e-mailed to investors.

The International Monetary Fund raised its growth forecast for Belize’s economy on Nov. 15, saying that growth would reach 3.5 percent to 4 percent this year, up from a 2.3 percent forecast in its World Economic Outlook report in October.

‘More Complicated’

Given the improved economic growth, which the government attributed to stronger than expected recovery in agricultural production, the revised restructuring offers provide more favorable coupon rates than the original Aug. 8 proposals.

One scenario would lower the current 8.5 percent coupon rate to 4.5 percent for five years and then bump up to 6.75 percent thereafter.

“The two parties are still far apart even though it’s significantly closer than they were,” Carl Ross, an Atlanta-based managing director of investments at Oppenheimer & Co., a brokerage firm, said in a telephone interview. “The longer the process takes, the greater the legal fees pile up. The longer the government is in default, the greater the past interest payments build up. The longer it drags on, the more complicated it becomes.”

Prices on the defaulted debt fell 0.48 cent today to 39.00 cents.

To contact the reporter on this story: Adam Williams in San Jose, Costa Rica at

To contact the editor responsible for this story: Joshua Goodman at

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