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LOO comments on the current state of the Superbond

The Government of Belize requested a thirty-day extension having missed a seven million US dollars coupon payment to bondholders which was due on May twenty. The Briceno Administration is seeking the consent of eligible beneficial owners of the so-called Superbond due 2034 to extend the grace period to September nineteen, 2021. On Wednesday, Minister of State in the Ministry of Finance, Chris Coye told Love News that communications are ongoing between the debt management team and the creditors. S & P Global Ratings downgraded Belize’s rating to selective default. Bondholder, Carl Ross, exclusively told Love News today that as of today, bondholders are scrambling to accommodate Belize’s most recent consent solicitation. According to Ross, this requires administrative and strategic decisions that take time to make, and the time frame offered in the consent solicitation has been very short. Ross told Love News that bondholders respect Belize’s desire not to enter into a “hard default” and take this as a positive signal but bondholders say that they are being offered essentially nothing in return for delaying the payment yet again. Bondholders say they are trying to wrap their minds around Belize’s request to delay the coupon payment a further four months until September especially in the context of all the coupons bondholders have forgone thus far. According to Ross, the government is trying to give itself more than ample time to negotiate some sort of solution. Ross says quote “We are also trying to understand whether the time being asked for by Belize can be used productively to reach some kind of agreement on the bond to address Belize’s short-term liquidity problem. If we determine that the time can be used productively, we are ready to engage with Belize.” (End of quote) Bondholders are placing a high priority on Belize’s situation. The vast majority of the other 70-80 countries in their portfolios are not in default, so this gives bondholders extra time to focus on Belize. In fact, according to Ross bondholders are spending a lot of time this week to try to help Belize avoid a hard default, even though bondholders are receiving nothing in return. Ross says that (quote) Belize’s efforts to avoid a hard default, even though its actions to date represent a default in the eyes of the markets and rating agencies, signals that perhaps there is a small amount of goodwill and willingness to pay from Belize, despite its repeat defaulter status. Avoiding a hard default also reduces the risk of legal actions that could be taken by any and all of Belize’s creditors. (End of quote)

As we said it is treacherous waters that Belize is navigating through and the Briceno administration is optimistic they can succeed. However, the UDP is not enthusiastic. Opposition Leader Patrick Faber who criticized the Government for unsuccessfully engaging bondholders.

According to Ross, bondholders are still hopeful that the government will see all of the benefits of an IMF program that could provide additional funding for the homegrown program, including social safety nets. However, bondholders say that it would seem that the government views this as too risky from a political point of view. Opposition Leader Patrick Faber says that an IMF Program is not necessarily a program that a Belizean government should adopt.

Hipolito Novelo, Love FM News: Do you still maintain the position that Belize should not accept an IMF program ?

Patrick Faber, Leader of the Opposition: “Absolutely. The IMF measures are very stringent and quite often come at the cost of bringing about human suffering and as you know the UDP as a party and in administration had long resisted that because we don’t believe in doing things that way that will cause human suffering. We believe that there is a good balance that can be found but that balance and convincing others that you are going to really engage in that balance that will produce home grown action has come with the political will and the credibility to do that. You can’t be saying one thing with one side of your mouth and then having actions go in a different direction to the other side of the mouth. So we believe that there can be home grown solutions to these issues but you have to be serious about it and it is clear for us the People’s United Party is not on that path, they want to have their cake and eat it in terms of some of these measures that are quite frankly some of them corrupt. I see the very many nepotistic appointments, the overpay offices that they are offering, the rental space that they’re getting all these things can’t add up to convince a single soul that you’re trying to cut expenditure or that you don’t have monies to do certain things when you are in fact almost on a splurge with these other things. The UDP would have done it differently.”

Hipolito Novelo, Love FM News:  The opposition is normally consulted by the Article 4 consultations. Did you get the sense from them that we are at the end of our rope ? That there is no other option than an IMF program. I mean because the former Prime Minister Barrow suggested before departing that we’d have to talk to the IMF. 

Patrick Faber, Leader of the Opposition: “I did meet with the IMF folks virtually when it was they did the Article 4 consultation and I well the picture that was painted was indeed what the government says it is but I did not get the impression that – and I guess it is the nature of the engagement – that they are insisting or that they will tell you “Listen this is what you must do.” I think where that insistence comes in because the IMF is not that kind of imposing body, they will tell you give you recommendation as to what you ought to do but they’re not going to tell you “Listen this is the end of the rope.” Where that comes into play is when you want your creditors to give you some kind of slack and so they’re now engaging with the bond holders committee for instance that they’re going to say “Well you know you have to convince us that you’re serious about fixing things or recovery economy and if you want us to really believe you we have to see some kind of IMF program.” that in itself coming from the bond holders indicates a lack of trust in the PUP administration but that is where you’re going to see the noose tightening around your neck in terms of an insistence on IMF program.”

Belize’s Article Four Annual Review of the Economy will be discussed by the IMF’s Executive in June.