Moody's Raises Belize's Ratings After Successful Debt Swap, by Robert Lee, for LawAndTax-News.com, London 16 February 2007
After almost all of Belize’s bond-holders accepted the debt swap offered them, Moody’s Investors Service announced this week that it has raised Belize's credit rating from Caa3 to Caa1. Belize's Caa1 country ceiling for bonds was raised to B2 and the foreign currency country deposit ceiling of Caa3 was raised to Caa1, all with a 'stable' outlook.
Moody's said the upgrade reflected improved liquidity following the restructuring of the government's external commercial obligations, alleviating concerns about cash-flow over the next few years.
The Belizean government announced last week that 93% of its bondholders have taken up the US$500m debt swap it offered in December to replace existing commercial foreign debt new instruments maturing in 2029.
Principal repayments on the new bonds will start in 2019. The bonds will bear interest in the first three years after issuance at a fixed per annum rate of 4.25%. In years four to five, the rate will step up to 6.00%, and thereafter through the maturity of the bonds the interest rate will level off at 8.50% per annum.
The exchange offer was preceded by four months of intensive consultations with the affected creditors by the Belizean authorities.
"On its existing terms," explained Belizean Prime Minister Said Musa in December, "Belize's stock of external commercial debt is visibly unsustainable. Through this transaction, Belize will have consolidated the debt into a single new series of bonds, improved liquidity for the creditors, stretched out maturities and significantly lowered the average rate of interest on the debt. Over the next five years, this transaction will save an estimated $301 million in debt service costs for Belize in comparison with existing terms."
Tenders by the creditors were due by January 26, 2007, and the transaction is expected to close during the third week of February.
Prior to the swap, Belize bonds were trading at 72 cents on the dollar, and bond yields on the 9.75% coupon bond due in 2015 had reached nearly 16%.