Restructuring of Bonds May Need Support from IMF

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Updated: December 12, 2016

As we reported earlier, Prime Minister Dean Barrow led a delegation to meet with creditors of the Superbond in New York, USA in an effort to see what can be done to ease the upcoming financial obligation as it relates to the coupon payment due in February 2017.  The Superbond 2038 is in the amount of about five hundred and thirty million US dollars.  In a report by Reuters News Agency, indications are that the creditors are somewhat wary of the temporary measures being proposed and that the fiscal adjustment being put forward may not suffice to stabilize the situation.  While the involvement of the International Monetary Fund (IMF) would provide more confidence in Belize’ s proposals, Charles Blitzer who was once with the IMF was noted as saying that debt relief without a strong commitment to fiscal reform would do little to alleviate the country’s financial debacle.  Blitzer further noted, quote, “It is important that another restructuring not result in merely kicking the can down the road; in my opinion, there must be a strong, and credible, fiscal program in place in order to significantly reduce future crisis risk for Belize.”  End of quote.  One of the creditors says it is a bit of a dance now as the Government of Belize has noted that to take on design programs funded by the IMF would be politically costly.  The terms of the restructuring are pending and it is hoped that another meeting will take place before the end of the year that would yield more substantive results.  If that meeting happens it will fall in line with Belize’s timeline since the changes would take effect prior to the due date for the coupon payment which is February 20, 2017.  It will also prove timely since Government would then be able to have a clearer picture before the next fiscal year begins and the budget is brought to the House of Representatives.  Amortization for the Superbond 2038 begins in 2019 with its coupon set to increase from five percent to just over six point seven percent in August 2017.  Prime Minister Dean Barrow is hoping to have the terms of the 2038 notes amended through what is called a simple consent solicitation.  Through this process the Government seeks to see a reduction in principal, an amendment to the notes’ coupon and amortization structure or an extension of the final maturity.  This restructuring marks the third in ten years; Belize’s external debt was consolidates into a Superbond in 2007 under the Musa administration and was then restructured through the issuance of 2038 bonds in 2013 under the Barrow administration.