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Joined: Oct 1999
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Marty Offline OP
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Cites Restructuring Risk

Standard & Poor's Ratings Services downgraded Belize's credit rating two notches deeper into junk territory, citing the increasing likelihood that government officials will seek to restructure the nation's debt this year.

The latest downgrade is the second by S&P this month following a single-notch cut on Feb. 6. Belize's credit metrics have faced pressure from low economic growth, a weak investment outlook, higher crime rates and the government's limited ability to raise revenue.

S&P now rates the Central American nation at triple-C-minus, which is nine rungs below investment-grade status. Its outlook is negative.

Belize's United People's Party is favored to win a majority in the March 7 parliamentary elections, though S&P said both of the country's main parties have political incentives to seek to restructure the nation's debt.

Talk of such a move has solidified from campaign rhetoric into a campaign pledge, the ratings firm said Wednesday, as weak economic growth prompts policy makers to seek other ways to make the budget cover current social programs.

The debt in question is a $546.8 million superbond due 2029, which came out of Belize's 2007 debt exchange.

S&P expects the next administration to try to restructure Belize's commercial debt before its next coupon payment is due in August, calling the move "our base-case scenario."

S&P rival Moody's Investors Service earlier this month lowered its credit rating on Belize one notch, citing its concerns about the possibility of another debt restructuring. Moody's cut Belize to Caa1, which is now two steps above S&P's current rating.


NOTE: United People's Party??????

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Marty Offline OP
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S & P Strikes Again

Three hours ago, Standard and Poor's the New York Rating agency, downgraded Belize again - this time by two notches.

According to the Wall Street Journal, the downgrade pushes "Belize's credit rating two notches deeper into junk territory." Standard and Poor's points to what it calls "the increasing likelihood that (the UDP) will seek to restructure the�external debt,"

The S and P analysis says that, quote "Although the (UDP) is favored to win a majority in the March 7...elections, we believe the political incentives are sufficient for either the UDP or the (PUP)--to pursue...a restructuring." The release points to the fact that recently the UDP has begun to frame the restructuring as an explicit campaign pledge.

Regarding the double downgrade, preceded by another three weeks ago, Prime minister Dean Barrow recently told an audience at a public meeting in Orange Walk that, quote, "I don't give a damn about the rating agencies."

Channel 7

Minister says credit rating not affecting country

Doug Singh

As we told you, this evening S&P downgraded Belize's credit standing. According to Singh, if elected the government intends to re-negotiate the terms of the Superbond to reduce the interest. He also says that the reduced credit rating doesn't affect Belize at this time.

Doug Singh

"There's a mad scramble to buy Belize bonds out there you know? I don't know why people think that this is a tragic thing. You know how many people are rushing to buy our bonds because right now the yield-because the speculation sale price on it is lower, the yield now has gone up even higher because they will earn that percentage on the principal no matter what they purchase it for. What we're saying is that the real yield to most of the holders now is at a high interest rate. If those people come back to the table who bought it for forty cents on the dollar or fifty cents on the dollar; they’re effectively earning sixteen, seventeen percent and we say listen let's sit down here and get the interest rate down where you can earn a reasonable interest rate. It benefits all of us. So I don't see why this impacts negatively on the bond holders. Even when I listen to what COLA had to say, I didn't get a clear understanding that they understood the real dynamics of the external forces and the fact that 01:49:56 A downgrade in the credit rating doesn't really affect us right now. Why? Because the government can't go out and borrow on the open market; that was one of the conditions of the Superbond. Risk is balanced by investors. you have many different kinds of risk; you have country risk, you have investment risk and yet some of the riskiest countries have some of the highest possible return. Is Belize's tourism market a risky market to venture in when it is improving right now with overnight stays etcetera? If you look at where the investments are coming into this country-is oil a risky venture if there’s a credit rating problem in Belize? I don't see that if you look at the potential rewards. Yes, the people who are going to get the money to invest in Belize may have to get it at a higher premium because it is Belize you're investing in, there might be a little bit of legitimacy there. But most of these people who raise these capital, raise it in other ways; not necessarily on the open market for their investment."

Channel 5

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Marty Offline OP
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Institutional Investor on "the superbond"

The focus of concern is Belize's $547m 2029 issue. Known locally as "the superbond", the deal was the result of a 2007 debt restructuring after an ill-advised infrastructure spending spree. It accounts for half the country's public external debt, which stands at 69% of GDP.

Coupon payments on the bond started at 4.25% but have since stepped up to 6% and will rise to a hefty 8.25% later this year, while amortisation is due to start in 2019.

The latest round of uncertainty was set off at the end of January when Belize's prime minister Dean Barrow, announcing an early date for parliamentary elections of March 7, requested a mandate to, among other things, "do something about the superbond".

S&P promptly downgraded the sovereign from B- to CCC+. On Thursday this week Moody's followed suit, cutting Belize's rating one notch to Caa1 and putting it on review for further downgrade. The price of the 2029s collapsed to around 46, compared with 60 in mid-January.

What exactly Barrow plans to do about the superbond if, as seems likely, his United Democratic Party wins the elections, is far from clear.

Most analysts agree that the government will make the next coupon payment as scheduled on February 20 - and further comments from Barrow this week seemed to bear that out - but beyond that, there is no consensus.

Careless talk costs notches

Joe Kogan, head of emerging markets strategy at Scotiabank, said Barrow's remark may simply have been a case of pre-election political grandstanding that sparked an unexpected reaction from markets and rating agencies.

"My impression is that reneging on debt is not something they had really planned to do and that they weren't even thinking about dealing with the issues right now," he said. "They usually just like to mention the superbond as a
way to criticise the past administration."

He attributed the subsequent price movements to a combination of forced selling by accounts unable to hold triple-C paper and investor nerves over a relatively unknown credit. "Unlike some of the bigger markets it's hard to get good information on Belize, so when the little information that's out there suddenly turns very negative I can see how people would sell," Kogan said.

He pointed to the creditor-friendly nature of the 2007 restructuring - which involved only a 20% reduction in net present value - as an encouraging precedent for any similar action by the government, as well as Belize's heavy dependence on international and multilateral funding.

Stuart Culverhouse, chief economist at Exotix, was more pessimistic. "The low probability of a February default may have diminished this week but I do think that they've also firmed the line that a restructuring at some point is seemingly in their minds, and I can't see that that's not going to involve some reasonably significant loss to creditors," he said.

Belize's public finances are much healthier than in 2007 and enough funds are available to continue servicing the superbond. Central bank reserves stood at around $240m in November. However, the UDP's expropriations of Telemedia in 2009 and of Belize Electricity Ltd (BEL) from Canadian energy firm Fortis in July last year have raised the spectre of further high-handed government intervention.

"At the moment, uncertainty about what might happen has put a floor under prices on the superbond," said Culverhouse. "But if it looks likely that it's not going to recover, then investors might be more willing to sell because, although it's part of the EMBI index, it's only a very small constituent and why would you bother holding that when there are other things that are performing?"


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Marty Offline OP
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Belize government's re-election to fan bond worries

* Belize centrist government narrowly re-elected-TV

* Win would move country step closer to bond negotiations

* Tiny Central American country among top 20 debtors

BELIZE CITY, March 8 (Reuters) - Belize appeared to move closer to a potential renegotiation of its $550 million overseas debt on Thursday after local media reported the tiny Central American country's centrist government narrowly won a second term in power.

The United Democratic Party won a majority of 16 seats in the 31-seat parliament to the opposition People's United Party's 14, Channel 5 television reported. One seat was undecided, according to the station's tally. Official results are not due until later on Thursday.

Prime Minister Dean Barrow said before the election his first act, if re-elected, would be to win more favorable terms for Belize's so-called superbond, which makes up half the country's debt and 40 percent of gross domestic product.

The interest rate on the bond stepped up to 8.5 percent this year and will account for 12 percent of estimated annual government revenue. The country of 313,000 people faces a further squeeze when principal repayments come due in 2019.

"The first thing that we do after being re-elected is to announce an appointment of a team to go and renegotiate that superbond to give us better rates - far better rates because we aren't taking it anymore," Barrow said on Feb. 19.

So far the 61-year-old lawyer has given no details of what he might suggest to creditors. Analysts said outright default was unlikely but options might include a request for lower interest rates, delayed principal repayment, cash-flow relief or an extended maturity on the 2029 bond.

"He never said what exactly he wants to do, but everyone is interested in how to make those payments because it will mess up our income," said fishery department worker Remaldo Acosta, 40, lining up to vote on Wednesday in the town of San Pedro on Ambergris Caye, off Belize's northern coast.

Ratings agencies Moody's Investors Service and Standard & Poors downgraded Belize's foreign-currency sovereign rating well into 'junk' territory in February after Barrow's comments.

S&P analyst Kelli Bissett said the CCC-minus rating and negative outlook reflected the high risk of default, or at least restructuring ahead of a scheduled August interest payment.

"Our best-case scenario reflects the expectation that a restructuring announcement from the government could come some period after the elections, possibly by August," she said last week.


Belize, about the same size as Massachusetts, is better known for its laid-back atmosphere and pristine coral reef than as an international investment destination.

But the bonds' inclusion in JP Morgan's benchmark EMBI Global Index means they are likely held by more fund managers than the issue's relatively small size suggests. JP Morgan has an 'overweight' recommendation on the bonds.

Belize's total debt accounts for about 80 percent of GDP, or $3,200 per head - lower than the 150 percent debt ratio Argentina had when it defaulted in 2002, but well above the sub-10 percent Ecuador enjoyed in 2008, when it defaulted on $3.2 billion in global bonds.

International Monetary Fund estimates show Belize, whose $1.25 billion economy relies heavily on tourism and agricultural exports like sugar and bananas, was the world's 13th most indebted nation in 2011.

Per capita economic output is half the Central America and Caribbean average and almost half the 313,000 population - a mix of Creoles, Spanish-speaking Mestizos, Maya Indians, African-descended Garifuna and German-speaking Mennonites - lives in poverty.

As well as the economy, offshore oil drilling and security were also key election issues, after the homicide rate rose 70 percent between 2005-10 to 41.7 murders per 100,000, on a par with neighboring Guatemala, according to the United Nations.

"I wouldn't like drilling off our beautiful island," said primary school teacher Maria Guerrero, 49, a native of San Pedro. "I want to keep it so my grandson can enjoy it too."

The ruling party, which enjoyed a 19-seat majority in its first term in office, has promised to hold a referendum on offshore drilling and to cut the murder rate back to 25 per 100,000.


Lower gas prices and renegotiate the Superbond!

Prime Minister Dean Barrow reiterated his pre-election promise that the government of Belize would explore all avenues to relieve Belize of the onerous burden of the billion-dollar Superbond, with which the past PUP government saddled the country.

The Prime Minister was speaking at the Belize Biltmore Plaza Hotel on Thursday afternoon, March 8, at a press conference he had called to evaluate the March 7th General Elections.

He admitted that the United Democratic Party's slim 17-14 victory was disappointing and that he, as the UDP leader, had expected to win at least 20 seats in the House. Nonetheless, he affirmed that the newly elected UDP government would hire a team of experts to renegotiate the Super bond, to obtain a cheaper interest rate and more terms for repayment over a longer period.

He also confirmed that his government would explore every avenue to get some sort of refinery built in Belize to refine local crude and offer Belizean motorists cheaper prices at the pumps, even if those prices were still linked to the world price of oil. He said his government would also be exploring the possibilities for producing bio-fuels, such as diesel from the jatropha plant.

While the Prime Minister acknowledged some of the criticisms in the report presented by the observer mission from the Organization of American States, the he said it was unlikely that Belizean politics would ever change its practice of having partisan booths near the polling stations to make a last-ditch effort to influence electors in how to cast their ballot.

As to the composition of the new government, he said the Belize Constitution limits him in appointing no more than 11 members of the House of Representatives to his Cabinet, although it also allows him to appoint up to five Senators as Cabinet ministers.

Barrow also brushed aside the suggestions from the media that the party might have been the cause of its own defeats and that Deputy Prime Minister Gaspar Vega was to blame for the losses in Orange Walk; since he had hand-picked the UDP candidates in that district.

He said he had every confidence in his Deputy leader for organizing the whole northern caucus of the party machinery, but that some losses were the result of the individual candidates themselves and not the party.

The Reporter

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Marty Offline OP
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a possible legal theory as to how Belize can default on national debt


"In international law, odious debt is a legal theory that holds that the national debt incurred by
a regime for purposes that do not serve the best interests of the nation,
should not be enforceable. Such debts are, thus, considered by this doctrine to be
personal debts of the regime that incurred them and not debts of the state.
In some respects, the concept is analogous to the invalidity of contracts signed under coercion."

Joined: Oct 2003
Posts: 2,461
Like uneven bargainning position?

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