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Bondholder Speaks Exclusively to Love News on Restructuring of Superbond

The Superbond has been a lingering cloud over the heads of Belizeans since it was first signed onto in 2003 under the leadership of the then Prime Minister, Said Musa. Three years later, under the same Musa administration came the first restructuring. Then came Prime Minister Dean Barrow who went for the second restructuring in 2012/2013. The fourth restructuring was later done in 2020 when Barrow had asked for a capitalization of the bond. Fast forward today, and the country is seeing a third administration seeking yet another restructuring of the bond. It is a sticky situation as every administration comes with a different style of management. In our interview with bondholder, Carl Ross, Love News asked if the political climate and landscape is factored in when a decision on restructuring is made.

Carl Ross, Bondholder, Grantham Mayo Von Otterloo: “The political landscape always factors into our risk analysis and you know the more unpredictable the political landscape, the more volatile the political landscape the higher the interest rate that bond holders demand. In Belize’s case the interest rate on the superbond is already way below the interest rate that would be commensurate with Belize’s risk factors. So we do take into account politics and political risk but when bond holders lend to a country and in this case the last time we restructured Belize’s debt we termed out the repayment schedule such that we lengthened it out so that Belize’s repayment schedule could be manageable – we thought. And we knew at that time that there would be several changes of government in Belize over the lifetime of the bond, that happens all the time in all countries but it’s an obligation of the country. So successive governments generally treat it as an obligation of the country that they have to take care of even though it might have been contracted by the previous government. In this case the original superbond as you know was contracted by the PUP under Prime Minister Musa that’s sort of the irony of this thing it has come full circle.”

According to Minister of State in the ministry of Finance, Christopher Coye, while he agrees that this restructuring may be kicking the can down the road, he also feels that the current administration’s idea of a home-grown plan could work without involving the IMF.

Christopher Coye, Minister of State [FINANCE]:
Christopher Coye, Minister of State, Ministry of Finance: “What it has been no doubt has been a period of kicking the can down the road and in this administration we feel that that cannot occur any longer and I think Mr.Ross would agree with that. It is just the mechanism by which we now deal with the problem we have. We believe that our homegrown recovery plan is the best way to deal with it and he believes that the IMF approach is the best way that’s just where the difference of opinion is. Ultimately we agree in many respects what needs to be done the IMF in their Article IV consultation recognizes that we are aligned with their views in many respects so far as what our plan is and that is where we maintain that we have committed, we have undertaken and we will pursue our efforts at fiscal recovery, debt sustainability and economic recovery according to how we feel the best approach is. I believe that looking at our plan it has more of a conscience if you will than what an IMF approach would involve. There are certainly the comments that have been made that the IMF is not the IMF of the past and I would agree with that to some extent in that they’ve certainly shown more flexibility but if you look at it that more or heightened flexibility has been more with the larger countries than with these small vulnerable countries like Belize.”

As we noted, it was less than one year ago that former Prime Minister Dean Barrow had gone to the bondholders with a consent solicitation which was approved, and referred to as the fourth restructuring. At the time, Barrow was interviewed on the matter where he made it clear that there isn’t much that the bondholders can do if Belize defaults in the superbond payments.

Rt.Hon Dean Barrow, Prime Minister of Belize:The whole idea of launching a consent solicitation is to get the approval of the bond holders for our request and to get that before the payment due date. In any case there is a month’s grace period so any triggering of a default clause could not take place until September. We are fairly confident that we will not have a problem with the bond holders. We believe that the relief we’re asking for is not particularly in terms of – from the bond holder’s point of view-  it’s not a big ask and so we think we’ll be alright. I believe that going by way of this fairly modest and moderate approach is the best thing to do at this time. If we simply said “Can’t pay won’t pay.” there isn’t a whole lot that the bond holders could do in my view. I keep saying we don’t have assets abroad for anybody to go after but the possible consequence of that could be that the IFIs start to look at you differently and start to treat you differently. Ultimately it could result in a cutoff of other flows because the IFIs I think don’t look at you particularly kindly if you simply walk away from your obligations. This way if of course there is not any agreement with the bond holders and we are in fact obliged to walk away the international community and in particular the IFIs would see that we in fact tried.”