After sending – in his own words – a “jolt” to the foreign investor community by defaulting on its U.S. $23 million Superbond coupon payment this past Monday, Belize Prime Minister Dean Barrow has today come out on a softer tone by saying that his intention is to arrive at a settlement with bond holders. Speaking at a press conference in Belize City this morning Mr. Barrow stated that “We are certain that we can reach an agreement with the creditors. It is our sense following the comments of the principals on an almost daily basis that there is a clear recognition on the part of the creditors that debt relief for Belize is a sure thing, unavoidable and is going to happen. So we are in fact in my view only talking about degree (of debt relief).”
But Mr. Barrow tempered today’s softer approach with a clear warning to creditors, stating that “My administration is unshakeable in its determination to secure the relief necessary, to place the public debt on a sustainable footing, and to remove the prospect of immolation. And we will go as long as we have to and do whatever we must to accomplish this. For it is neither bluff, bluster nor bravado when we say that nothing else will suffice.”
Asked about the possibility of debt negotiations breaking down following the negative reactions from bond holders over Belize’s proposals to have the principal reduced by as much as 45%, a scalping instead of a haircut as some analysts have described it, Mr. Barrow said “We make clear that we are not at all at a point where there is any contemplation of any possibility that the negotiations will not proceed. And we make clear that we are absolutely confident of success. We are absolutely confident that we can succeed at an agreed solution with our creditors. But if God forbid that does not happen Belize is prepared for all options.”
Asked if Belize is not concerned about being locked out of credit markets or litigation from bond holders if Belize defaults, Mr. Barrow said he is not concerned as his country is not seeking commercial loans. As for litigation he said, “Countries that have previously defaulted, Argentina, Ecuador, for example, I don’t think that bond holders have gotten very far in trying to seize the assets of those countries abroad. I don’t know about any assets that this country has abroad.”
Belize owes foreign creditors U.S. $544 million in sovereign debt popularly known as the Belize Superbond. The current government claims that it is seeking popular support in Belize to not pay the debt as currently structured. It has proposed three scenarios ranging from cutting the principal by almost half, to extending the date of maturity beyond 2029. But Mr. Barrow who won a narrow re-election in March has refused to seek the participation of the opposition Peoples United Party in the Belize House Of Representatives in the debt restructuring talks. Mr. Barrow suggested that he expects that bond holders will request direct negotiations with Belize within the next week.
For background, the official alternative proposals put forth by Belize to the Superbond creditors are:
1. a 50-year “par” option, with a 15 year principal grace period and a 2% interest rate
2. a 30-year, 45% “discounted” option, with semi-annual repayment installments, without any principal grace period and with a step-up interest rate starting at 1% and gradually rising to 4%
3. a 30-year, 45% “discounted” option, with a 5 year principal grace period, and with a mortgage style repayment at an interest rate of 3.5%
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