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Re: Concern Rises Over Belize Debt [Re: Marty] #442061
07/07/12 11:02 AM
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Market Price under various assumptions for coupon and exit yield of the belize superbond


Re: Concern Rises Over Belize Debt [Re: Marty] #442063
07/07/12 11:17 AM
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The more things change, the more they stay the same

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Re: Concern Rises Over Belize Debt [Re: Marty] #443632
07/31/12 06:53 AM
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Default Concerns Make Belize’s Bonds Worst In Emerging Markets

Belize’s notes are the worst performers in emerging markets this month as the Central American nation’s budget deficit widens and concerns grow that the government will force holders of $544 million of bonds to take losses in a restructuring.

Belize’s dollar bonds have fallen 2.5 percent this month, the most among 52 emerging-market countries tracked by JPMorgan Chase & Co’s EMBIG index. Brazilian and Indonesian bonds have gained 4.2 percent over the same period. Yields on Belize’s so- called superbond due in 2029 climbed 145 basis points, or 1.45 percentage point, to 20.08 percent this month as the country nears its second restructuring in five years.

Prime Minister Dean Barrow, who campaigned on a promise to restructure the bonds, told lawmakers in June that lowering the debt burden is “unavoidable.” The government faces an Aug. 20 payment of about $25 million and Barrow said Belize’s budget deficit will swell to 2.5 percent of gross domestic product next year from 1.1 percent this year. Investors are starting to “appreciate the difficulty” the government will have in meeting creditor demands, said Stuart Culverhouse, chief economist at Exotix Ltd.

“The market has underpriced the risk until this month,” Culverhouse, who downgraded the bonds from hold to sell on July 5, said in a phone interview from London. “People are now beginning to focus on when the concessions are happening.”

Officials at Belize’s Finance Ministry didn’t return calls seeking comment.

Restructuring ‘Imperative’

The superbond accounts for about half of the nation’s $1.2 billion debt, which has fallen to 81 percent of gross domestic product from 91 percent in 2007, Barrow said. He vowed to pursue more lenient payment terms after interest rates on the notes rose to 8.5 percent this year from 6 percent as part of an accord reached with bondholders in 2007.

“The imperative for restructuring is therefore irresistible,” Barrow said in his budget presentation to Congress on June 29, describing the 8.5 percent coupon as “harrowing.”

Moody’s Investors Service cut Belize’s credit rating for a second time this year on June 1 to Ca, 10 levels below investment grade, citing weak growth in the $1.4 billion tourism-based economy. Moody’s first lowered the rating in February, prompting Barrow to say he “doesn’t give a damn” about ratings companies.

“All eyes are on Belize to make the coupon payment,” said AJ Mediratta, a partner at Greylock Capital Management who is leading negotiations for a group of investors holding about $300 million in Belize bonds. “The country has the money to make this coupon payment. We know it is there.”

Economic Growth

While Culverhouse at Exotix also said he expects the government to pay off bondholders, the risk of investor losses in a restructuring outweighs the chance for a profitable settlement “at this juncture,” he said.

Belize’s economy will probably expand 2.8 percent this year after growing 2 percent in 2011 and compared with 4 percent growth for Central America, according to the International Monetary Fund. Barrow said the expansion will be driven by growth in banana and sugarcane output, as well as electricity production and tourism.

An increase in debt service levels combined with declining oil revenue will place a heavy strain on public finances and the economy, the central bank said in a report last month. Belize is still negotiating an agreement with the former owners of the country’s telecommunications and electricity companies, which were nationalized starting in 2009.

The government has made few public comments about the status of its planned restructuring. The delay has surprised investors, said Boris Segura, a Latin America strategist at Nomura Securities International in New York.

“We were expecting some announcement sooner from the government,” Segura said. “It will be very difficult to have this debt restructuring wrapped up by August 20. If you are trying to reach an amicable restructuring, you try to do that from a position of being current on your debt.”

BLOOMBERG


Re: Concern Rises Over Belize Debt [Re: Marty] #443812
08/02/12 05:34 PM
08/02/12 05:34 PM
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Superbond payment on near horizon; recent report worrisome

From gold to Superbond; a coupon payment of forty-six million dollars is due on the twentieth of August and the eyes of credit agencies are on Belize to see if it will be met. Bloomberg BusinessWeek today described Belize’s notes as the worst performers in emerging markets this month since the dollar bonds fell by two point five percent. That is attributed to the massive deficit in the national budget, and there are concerns that bondholders will suffer losses in the second restructuring of the debt in five years. The August payment will swell the budget deficit from one point one percent to two point five percent of GDP next year. The article quotes AJ Mediratta of Greylock Capital Management, who is leading negotiations for a group of investors who hold about three hundred million dollars in bonds and says, “The country has the money to make this coupon payment. We know it is there.” While, there hasn’t been much word from the government on the progress of the negotiations, Latin America Strategist of Nomura Securities International, Boris Segura, says it will be very difficult to have the debt restructuring wrapped up by August twentieth and if GOB is trying to reach an amicable agreement, it has to be current with the debt. The Superbond is five hundred and forty-four million dollar and accounts for about half of national debt of one point two billion dollars.

Channel 5

Re: Concern Rises Over Belize Debt [Re: Marty] #444242
08/09/12 06:51 AM
08/09/12 06:51 AM
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Introducing Superbond 2.0

Is the world ready for Superbond 2.0? Well it better be because the Government of Belize launched its best offer on the Central Bank Website today. It's called the "Indicative Restructuring Scenarios" and the three page document outlines three scenarios for holders of the Superbond. First, some background: We already told you that at the end of June, that same Central Bank Website had posted an "Economic Brief" basically making the case that with falling oil revenues and looming compensation, Government can't afford to continue servicing the Superbond.

Well now, a month a and a half later - these scenarios outline what the Government says it can afford - and all three scenarios represent a loss to bondholders - but major savings for taxpayers.

"Scenario A" is a 50 year bond at a flat 2% coupon rate with a 15 year grace period - the original Superbond was for 22 years at much higher, stepped-up coupon rates.

"Scenario B" proposes a principal haircut of 45% - and is a 30 year bond with varying interest rates and no grace period.

"Scenario C" - very much like B, proposes that 45% principal haircut, with a five year grace period at 3.5% interest on a 30 year bond.

Now if the only haircuts you know about are the ones you get at a barbershop - well, join the club.

The bottom line? Bondholders - in general - would lose about a quarter of what's called net present value, amounting to savings of millions of dollars for government. We say "in general" because some bondholders bought the bonds on the cheap - and their losses would be less.

But right now government is paying about 93 million dollars in interest annually, on a stepped up coupon rate of 8.5%.

Under one of the new scenarios, that interest rate would go to 3.5% on a principal figure that is 45% less - translating into huge savings for the public purse.

But, that's the proposal. Now that these scenarios have been sent out to the world - bondholders will react - and probably many of them in anger - because they don't want to lose the value of their bonds.

And that's what will make the next 12 days interesting: because Belize's next bi-annual superbond payment is due on August 20th. Will Belize make the payment? Well it's budgeted, but even so it will be a stretch for government.

We'll keep monitoring developments closely in the days to come.

Channel 7


Superbond due on August 20th

The Ministry of Finance and Economic Development has released what it calls the Indicative Restructuring Scenarios on the five hundred and fifty-seven million U.S. dollar super bond. The document is available on the Central Bank’s website at www.centralbank.org.bz. A negotiating team led by Mark Espat has been meeting with multilateral partners to fine-tune macro economic projections and finding ways to offset the nineteen point five million dollars shortfall in oil revenues. They have also been talking with the former owners of Belize Telemedia and B.E.L., on compensation. B.T.L. was nationalized in 2009 and B.E.L. in 2011, and according to the document, former shareholders of B.T.L. and Fortis are willing to consider out of court settlements. In the document, the Government presents three options that it will pitch to the holders of the Superbond. The Government says each of the three options would close financing gaps in a sustainable manner. The first option extends the Superbond maturity to 2062 at two percent interest. It includes a fifteen year grace period. The second option extends the Superbond to 2042. There is no grace period, but there is a forty-five percent discount on the principal. Interest will step up gradually from one to four percent throughout the period. The final option has a five year grace period as well as a forty-five percent principal discount and three point five percent interest throughout the term, which also ends in 2042. The government has had to commit to boost revenues while putting a cap on expenditures and investments.

Some of the measures were built into the budget and have been approved such as the VAT on petroleum products and the hotel sector as well as the reform of the banking sector regulation. Others are projected to be put in place by the end of the year or in the next fiscal year to ensure that fiscal targets are realized. With all the options presented, the government is seeking to pay less and at a later stage. The next coupon payment of the Superbond is due on August twentieth for forty-six million dollars with an interest of eight point five percent. On the other hand, S & P has revised the economic outlook from stable to negative, which reflects that low growth and investment, rising crime, public sector wage pressures, and hard budget constraint will reduce ability to pay debt service. With additional constraints from declining oil production, the country remains dependent on external financing and it is expected that net Foreign Direct Investment will fall below the current account deficit in 2012 for the first time since 2005.

Channel 5


Re: Concern Rises Over Belize Debt [Re: Marty] #444310
08/10/12 06:54 AM
08/10/12 06:54 AM
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Not Ready for The World?: Superbond 2.0 Gets Rough Reception

Last night we told you about the government's launching of what are called "Indicative Restructuring Scenarios." Basically, they are proposals for a Superbond 2.0 - with farm more agreeable terms than the present Superbond. It would save the government of Belize many, many millions of dollars - but represent significant losses for bondholders.

Well, today we got a feel for what the reception on the market is like - and it's not good.

A commentary from a Scotiabank International Analyst named Joe Kogan calls it, quote, the "worst restructuring terms."

He says, quote, "this proposal (is) one of the worst restructurings for bondholders in recent Emerging Markets history."

Kogan - who had been moderate in previous analyses of the Superbond difficulties - concludes that quote, "the government's strategy is puzzling. On one hand, they are going through the motions in consulting with bondholders and making their case for a restructuring. On the other hand, today's lowball offer will undoubtedly anger all bondholders, who would lose tremendously if they participated in such an exchange."

He closes by suggesting that there is room for government and bondholders to come up with a more creative solution.

As we understand it, Government's debt restructuring team anticipated this reaction - and has been engaging with bondholders.

Channel 7


Re: Concern Rises Over Belize Debt [Re: Marty] #444320
08/10/12 07:47 AM
08/10/12 07:47 AM
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Belize’s bond: not so super after all

Belize’s so-called superbond has not proved to be a super investment proposition.

The country has set out proposals on how it might restructure the bond, which bundled together several old debts (hence its name) and the ideas have been greeted with horror by investors. Essentially, the government wants to reduce the principal of the bond by almost half while extending the maturity by 13 years, according to one of the proposals. Interest rates on the issue, at 8.5 percent this year, could be cut to a flat 3.5 percent. Or investors could accept a 1 percent rate that steps up to 4 percent after 2019.

Markets had been expecting a restructuring ever since Prime Minister Dean Barrow said in February the country could not afford to keep up debt repayments. The bond duly fell after his comments but picked up a bit in recent months after Barrow assured investors the restructuring would be amicable. Investors holding the bond are now nursing year-to-date losses of 24 percent, according to JP Morgan.

There’s worse. If the government sticks to its original proposals, says Stuart Culverhouse, head of research at brokerage Exotix, the principal of the bond, currently at $544 million, could fall under $500 million. That will push it out of the main bond benchmark for emerging markets, JP Morgan’s EMBI Global, and would trigger automatic selling by funds benchmarked to the index. Culverhouse predicts that the bond, now trading at 42 cents on the dollar, will fall eventually to the low-20s. It started the year just over 60 cents.


JP Morgan which had been advising an overweight position on Belize relative to the EMBIG index, cut its recommendation to marketweight on Thursday. It tells clients:

We see the government’s opening stance indicating there is little upside to current bond prices, especially over the coming months.

So will the Belize debacle cool some of investors’ enthusiasm for frontier markets?

Maybe not. Bonds from these countries, mostly poor and usually first-time bond issuers, have been in high favour due to the yields they offer and so far this year they have outperformed the broader bond index. A country like Belarus for instance provides a 900 basis-point premium over U.S. Treasuries compared to the 160 bps pickup provided by a “safer” emerging markets credit Brazil.

What’s more, these frontier markets have been active bond issuers of late and already make up a tenth of the index (issuers include Sri Lanka and Guatemala that would once have been viewed as deadbeat credits). JP Morgan calculates that $1.8 billion worth of frontier dollar debt hit the new issue markets in the first half of 2012 and predicts another $2.5 billion before the year is out.

Reuters


Re: Concern Rises Over Belize Debt [Re: Marty] #444367
08/11/12 06:40 AM
08/11/12 06:40 AM
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More Banking Backlash On GOB Restructuring Scenarios

There is more angry reaction on the money markets to Government's so-called "Indicative Restructuring Scenarios". A UK Investment Banking Consultant called Exotix describes it thusly: "BELIZE - RESTRUCTURING PROPOSALS: WORSE THAN EVEN WE EXPECTED." They go on to explain that quote, "the proposals are even worse (for bondholders) than the fairly pessimistic scenarios we set…and are certainly worse than the market has been expecting."

The analysis notes the 46 million dollar coupon payment is due in ten days, and they say, quote, "We don't think the authorities would want to default on the coupon."

That is a matter, still unresolved, we gather - though the payment has been budgeted.

Channel 7


Will bondholders take the new options?

A few bond restructuring options have been posted on the Central Bank of Belize’s website. And according to a research analyst, there are default concerns. The yield on the bond in its current form, jumped three point five percentage points to twenty-three point four percent after the announcement of the three options, which suggest that bondholders lose forty-five percent of the initial value of the bond.

Brief analysis and tracking of the bond continues to indicate that the value of Belize’s dollar bonds continues to fall and the default risk seems higher. Over the last month, the value of the bonds fell two point five percent and its yields climbed one hundred and forty-five basis points to twenty-point eight over the past month. The yields have climbed eight hundred and seventy-two basis points from a year ago. According to a report, the proposal is viewed as even more negative for bondholders than had been expected.

The lead negotiator for the bondholders maintains, in recent reports by Bloomberg, that they will not entertain or accept a discount on the present value of the bond. Accordingly, when the three restructuring options were released, bondholders retained their ‘Sell’ recommendation.

After continuous downgrades of the bonds to junk status, Moody’s Investors service cut Belize’s credit rating for a second time this year on June first to Ca; that’s ten levels below investment grade, citing weak growth among other detrimental factors.

Channel 5


Re: Concern Rises Over Belize Debt [Re: Marty] #444446
08/13/12 06:53 AM
08/13/12 06:53 AM
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Using an exit yield of 15%, GOB is offering under $20 for all scenarios in "the indicative restructuring scenarios".



Re: Concern Rises Over Belize Debt [Re: Marty] #444510
08/14/12 06:47 AM
08/14/12 06:47 AM
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Superbond 2.0: Creditors’ Committee Makes Slight Saber Rattle

The Government of Belize's proposals for Superbond 2.0 continue to get hammered by analysts, and now bondholders - in the form a Creditors Committee - are voicing their dissatisfaction.

A press release from Broadspan Capital - which has been organizing a Creditors' Committee quotes Committee Co-Chair AJ Mediratta as saying that quote "Bondholders have more questions than answers at this point."

If Mediratta's name has a faraway but familiar ring - it should, he's been in our news before. In the good old days of capitalism run amok, he was a Senior Managing Director at Bear Stearns who helped Belize float two of the bonds and secure two insured loans - all amounting to about 340 million dollars of the 547 million in burdensome debt that had to be wrapped into the Superbond.

Well, now, he's back, and working the other end of the table where Mediratta's committee says government has not released material information necessary to evaluate the country's debt sustainability.

Mediratta also adds, quote, "we do not consider the indicative scenarios released last week as the start of negotiations…. we will respond to proposals that are clearly based on ability to pay using reasonable, mutually agreed assumptions." The Creditors Committee does not say is what percentage of bondholders it represents but it is recruiting those bondholders - so that it can achieve critical mass and better leverage Government in negotiations.

The next Superbond payment for 46 million dollars is due a week from today - which makes the air around these exchanges all the more tense.

Channel 7


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