Earlier.....

First Insights: Belize: No default yet?

Yesterday marked the official end of the 30-day grace period for Belize to make its August 20 coupon payment, for the amount of USD23mn. However, in a press report earlier today (Reuters) (link) Prime Minister Dean Barrow suggested the possibility of the country achieving an extended grace period, in return for a partial payment on this coupon. The key word here is "reciprocity".

In the original bond indenture, one of the "events of default" is precisely the failure to pay principal or interest for a period of 30 days after they become due. In such a case, not less than 25% of bondholders may declare the principal amount of all the bonds due and payable immediately ("acceleration").

We suspect that the "extended grace period" in return for a "partial payment" on this coupon means that the Superbond will not be accelerated while negotiations continue. However, we think that the government and bondholders are still far apart in terms of what public sector debt sustainability means for Belize.

If such an announcement is made later today, we would view it in a positive light. On the one hand, the Belizean authorities would show good faith in this negotiating process and also some willingness to pay. On the other hand, this would mean that the bondholders committee effectively encompasses a majority of bond holdings, which we think bodes well for recovery value under this restructuring exercise.

Stay tuned for a possible announcement later today.


Just In......

First Insights: Belize: Keep the negotiations going

The Government of Belize just announced that it made a partial (around 50%) payment on the August 20, 2012 Superbond coupon. The authorities also indicated that they have been engaged in discussions with the Coordinating Committee of Belize Bondholders, and both parties have identified a common framework to advance negotiations.

In a separate (and almost instantaneous) press release, the Belize Coordinating Committee welcomed Belize's decision to make such a partial payment and confirms the negotiations with the country. In addition, the Committee has agreed not to seek legal remedies for a period of 60 days (we suspect that bondholders are not accelerating payment), in order to advance and, hopefully, conclude negotiations on the restructuring.

These latest developments are in line with our thoughts from earlier today (Belize: No default yet?, 20 September 2012). In particular, we view these latest developments in a positive light, as both parties seem to have begun negotiations in good faith. Let's see if 60 days is enough for a negotiation process that has not been smooth so far.

Contributing Strategists
Boris Segura
+1 212 667 1375
[email protected]
Nomura Securities International Inc.