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Marty Offline OP
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12:41pm EST
-- There are signs that the Belizean government is becoming less willing to service its external commercial debt.

-- In addition, Belize faces external imbalances, limited access to external funding, and rising costs of servicing general government debt.

-- As a result, we have lowered our long-term foreign- and local-currency sovereign credit ratings on Belize to 'CCC+' from 'B-'.

-- The stable outlook balances the possibility that the government will seek debt relief to reduce a rising external interest burden against the possibility that debt management will improve after the election.

Feb 6 - Standard & Poor's Ratings Services said today that it lowered its long-term foreign- and local-currency sovereign credit ratings on Belize to 'CCC+' from 'B-'. The 'C' short-term credit ratings are unchanged. The outlook is stable.

"The downgrade reflects signs of lower political willingness to service Belize's external commercial debt obligations," explained Standard & Poor's credit analyst Kelli Bissett. "In addition, Belize faces external imbalances, limited access to external funding, and rising costs of servicing general government debt." On Jan. 31, 2012--during an announcement scheduling early elections for March 7, 2012--Belizean Prime Minister Dean Barrow introduced continued debt service of the government's US$546.8 million bond (known locally as the super bond) as an election issue. The nature of the statement and prominent public office of the speaker signals, from a credit perspective, lower predictability that the government will continue to service its external commercial debt. Although a future United Democratic Party (UDP) government could ultimately back away from its leader's campaign rhetoric, the injection of the superbond into the campaign follows increased policy unpredictability (including the nationalizations of Belize's main electricity and telecom companies in the last two years) and raises questions about the political commitment to timely debt service.

In addition, this announcement comes amid low economic growth, a weak investment outlook, increased levels of crime, and limited ability to raise government revenue, all of which, from a credit perspective, weaken the government's payment capacity. Belize's current account is weakening, and its external financing options are limited. Oil production (the government's most import foreign exchange earner) is in structural decline, and tourism prospects appear lackluster given the global economic slowdown. We project Belize's 2012 gross external financing requirement at 114% of current account receipts plus useable reserves. Belize's policy measures will likely depress foreign direct investment. Given Belize's fixed exchange rate regime, we expect the government to draw down reserves for a portion of its external financing. International reserves were US$250 million at the end of January. We expect that international reserves will decline this year and that delays in market participants obtaining foreign exchange will increase. On the fiscal side, a shallow domestic financial market--coupled with domestic resistance to raise tax revenue--present a hard budget constraint.

In addition, the coupon on the super bond is scheduled to step up to 8.5% annually from 6% in August. With that, we project that general government interest payments will rise to 15% of general government revenues. Furthermore, we expect government workers and teachers to demand higher wages once the next budget debate begins. Net general government debt was 63% of GDP at year-end 2011. Given Belize's financing constraints, we expect it to remain at this level through 2012. (For an expanded discussion of these risk factors, please see our latest report concerning Belize, published Dec. 28, 2011, on the Global Credit Portal.) The local-currency ratings on Belize are 'CCC+/C', the same as the foreign-currency rating, reflecting the country's pegged exchange rate and limited monetary and fiscal flexibility. The transfer and convertibility assessment is 'B-', one notch above the long-term foreign-currency sovereign rating, under our expectation that in the event of default, the government would not actively restrict access to foreign exchange for private debt service. The foreign-currency recovery rating of '3' for the Government of Belize indicates our forecast of post-default recovery of between 50% and 70% on the principal of commercial foreign-currency debt. In our default scenario, we would expect the government to pursue a best-efforts approach to restructure its debt, as it did in late 2006 (which gave rise to the super bond).

The recovery estimate, however, also incorporates constraining factors of relatively high levels of both public-sector and external debt. The stable outlook balances the possibility that the government will seek debt relief to reduce a rising external interest burden against the possibility that debt management will improve after the election. We could lower the rating if there were increased signs that the government intends to pursue a distressed restructuring or if additional external liquidity pressures were to emerge. An upgrade would most likely result from greater predictability about the political willingness to service debt and improved financing prospects. These would likely stem from an improved growth and investment outlook.

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Marty Offline OP
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from a friend

If I understand the S&P ratings, this means that the only rated country in the world with a lower S&P rating than Belize is Greece (not all countries are rated by S&P).

This is not good.

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Marty Offline OP
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S&P pushed Belize's Credit Status deeper into junk territory

As you know, the date for the general elections was announced last Tuesday by Prime Minister Dean Barrow, almost a year before they are due. What was probably missed by most people in his televised and radio statement had to do with huge debt that Belize owes internationally. Prime Minister Barrow said that his administration would seek "clear instructions" from the electorate to "do something about the Super Bond." What that "something" is was not spelt out by the PM but it has created great ripples in the financial markets internationally. Standard & Poor’s Ratings Services, for example, has pushed Belize's credit status a notch deeper into junk territory because it viewed the PM's comments as signaling less of a political will to service its debts. According to S and P, the announcement comes amid "low economic growth, a weak investment outlook, increased levels of crime, and limited ability to raise government revenue, all of which, from a credit perspective, weaken the government’s payment capacity." Similarly, Moody’s Investors Service has said that the PM's comments raised serious concerns about the U.D.P. government's willingness to service its debts. These rating agencies take the view that the decision of the PM to bring the government's five hundred and forty-six point eight million dollar bond into the election fray makes GOB's continued debt servicing less predictable.

Channel 5


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Marty Offline OP
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Barrow's suggestion of super bond restructuring "credit negative": Moody's



A recent pronouncement by the Barrow administration, in its bid for reelection, that it will seek the electorate's instructions on the billion-dollar super bond has caught the attention of a major international ratings agency.

"The mention of a potential modification to the super bond, a US$565 million bond equivalent to half of all government debt and the result of the 2007 debt restructuring, is credit negative and raises concerns about another debt restructuring," said the Weekly Credit Outlook issued by Moody's Investors Service, and dated today, Monday, February 6, 2012.

Moody's, in a report by Gabriel Torres, Vice President - Senior Credit Officer; and Maria Paula Carvajal - Associate Analyst, referred to Prime Minister Dean Barrow's speech last week announcing the date of General Elections.

In that speech, Barrow said, "We, therefore, ask for your clear instructions to drive the naysayers back; to do something about the super bond," which the ratings agency saw as a hint of a possible restructuring of the debt.

The graph accompanying the Moody's statement on Belize shows that the monies payable for the next term of government, 2012-2017, would increase by US$10 million over this year's payments; however, the increase is far more substantial for the subsequent term.

In fact, in 2019, Belize will have to start making principal payments on the super bond, which would mean the US$40 million payment (the current year's repayment) would balloon to nearly US$100 million over a span of 7 years.

Moody's notes today that, "Super bond debt service has been rising owing to coupon step-ups and will rise even further once the debt begins amortizing in 2019, putting increasing pressure on already weak public finances."

It went on to say that, "Belize (B3 stable) restructured most of its debt in late 2006 and early 2007, after years of increasingly higher funding needs that peaked at over 20% of GDP in 2005."

It noted that after the 2006/2007 debt restructuring, the government's funding needs fell dramatically to less than 5% of GDP last year.

It adds, however, that "...concerns remain about the long-term fiscal position as the restructured debt service increases."

Of note is the variation of interest rate for the super bond: "It has a stepped-up coupon, at 4.5% for the first two years, 6.5% for the next two, and jumping to 8.5% later this year," the outlook report explains.

"Given low economic growth, estimated at 2.2% on average 2007-12, and expectations of lower royalties from oil production, which has been declining 5% a year and is a key government revenue source, managing the increase in bond payments was always going to be a challenge for Belize," the report added. "The administration's declarations open the door for a possible new restructuring, even before the greater bond-related fiscal costs fully materialize."

Amandala


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@#%*! more fuel for the oil drilling revenue fires...

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Maybe Belize should hire some Greek financial consultants?

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Maybe!or perhaps Germany happens to like baklava...

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Marty Offline OP
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SCOTIABANK Analyst Urges Market To Be Calm On Bze Bonds

The international rating agency Standard and Poors audibly gulped when Prime Minister Dean Barrow said in his election announcement that he would seek "clear instructions" from the electorate "to do something about the superbond."
S and P automatically downgraded Belize saying that it appeared Government would not honour its superbond commitments. That sent bondholders scrambling trying to sell off the bond, but an analyst for SCOTIABANK international is advising a wait and see approach.

In a piece called "What did Belize's Prime Minister mean?" he notes that quote "We cannot know for sure what the government is planning in the long-run�Nevertheless, past speeches by government officials about the bonds suggest more willingness-to-pay than the market is currently pricing." End quote. He points also to positive GDP growth and that "the Belizean government insists, at least to foreign investors, that it has every intention of making upcoming coupon payments."

The bond is trading at $45 dollars, 15 dollars less than it was a month ago.

Channel 7

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Bear: At least the Greeks can pay Germany off in baklava, olives and gyros... what will Belize pay with? Johnny Cakes? Rice & beans?

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Originally Posted by SFJeff
Bear: At least the Greeks can pay Germany off in baklava, olives and gyros... what will Belize pay with? Johnny Cakes? Rice & beans?


indeed point well taken, but there must be something...Menonites?, tourists? wacky tabaccky? let me get back to you on that one Jeff...at the moment my spouse has me reviewing some damned thing called FBAR...

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