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Bondholders Say there is a Lot of Work Left Before the Blue Bond Program can be Implemented

In an extensive interview with one of Belize’s bondholders, Dr Carl Ross we were able to get a clear understanding of how the bondholders are reacting to Belize’s proposal to pay off the bond, and where the negotiations currently stand. According to Dr Ross there is a lot of work left to do.

Dr.Carl Ross, Bondholder: “The October 19th date is the date at which the thirty day grace period on the coupon extension that bondholders have given Belize expires on October 19th and what we’ve said is thirty days after that day, in other words November 19th would be a potential settlement date. I wouldn’t say that the 50% has already agreed. There is a bondholder group community that represents about 50% of the bonds and I am on a subcommittee of that group that was charged with negotiating with the Belize government. And so that subcommittee has agreed to the indicative terms but we still need to go out and convince the rest of our broader bondholder community, the 50%, that this is a good deal and the best deal that we can negotiate. And then that 50% needs to grow to 75% in order for the deal to go through and reach the collective action thresholds that are required. The holders of the Belizean superbond are a really diverse group of investors all over the world and you know most investors basically lend money to governments and they want to get paid back but some investors have different objectives, different utility functions if you will. Some investors think about being a long term development partner of a country that’s the way my company GMO views our role and other investors are more short term oriented looking for some quick money. I would say that Belize mostly has bond holders that are more the buy and hold long term investor type and you know this is a group that we kind of resist frankly a government saying ‘Well we don’t need the international bond markets anymore we’re gonna rely on other sources of financing and so we’re gonna buy back in this case we’re gonna buy back the bonds at a deep discount.’ We I think would rather have been a long term development partner of Belize and gotten our money back over time but it was clear that Belize had its own objectives and desires as well so it’s an optimization problem everybody has to be involved.”

Dr Ross goes on to say that on a positive note the bondholders could look at this payoff as a contribution to Belize’s marine conservation.

Dr.Carl Ross, Bondholder: “This is something that we’re doing. We’re taking a massive loss on our claim but we are getting something in return we’re getting fifty five cents on the dollar and we’re also helping Belize with its environmental goals and preserving the marine environment around Belize which it’s a non monetary benefit for us, it’s obviously not a financial benefit we’re more interested in the financial benefits but I think in this case it was something that we thought well at least we’re contributing to that and that feels like a good thing. It’s complicated and but it’s also something that is quite novel and I have to take my hat off to the Belizean government for coming up with this idea. I mean bondholders we don’t really like it because we’re taking a massive loss on our claim but the getting the Nature Conservancy involved and involving sort of an environmental component to this debt buy back and basically doing that in a way that essentially exits the international capital markets at a deep discount and a deep loss to bondholders it’s not necessarily something I like but it’s something I respect that the Belizean government has been able to pull off and I think they are to be congratulated in a way although none of us bond holders are feeling very good about this from our standpoint but it’s a feather in their cap if they can do it and significantly cut the debt servicing cost from where they are now.”

Join us tomorrow evening for more on the superbond and the blue bonds for conservation.