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The Blue Bond Explained #553838
11/09/21 05:51 AM
11/09/21 05:51 AM
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Last week, we told you how Belize's participation in the Nature Conservancy's Blue Bonds for Ocean Conservation was making news all over the world. Among other positive views, the Blue Bond agreement with TNC is being referred to as "One of the biggest-ever debt restructurings meant to aid the environment."

That's because, as we told you, the restructuring of the Superbond's $553 million US dollar balance - which was due in 2034 - is being replaced by a 364 million US dollar Blue Bond. Over the course of 19 years, Belize will repay TNC, which then makes payments toward the bond issued by Credit Suisse.

It's a bit technical, but essentially, the Blue Bonds will replace the Superbond, and allow Belize to several hundred million dollars in debt servicing and debt relief. This morning, a representative of the Government of Belize and the TNC hosted a press conference, where we got to ask them all about the Blue Bond.

Chris Coye, the Finance Minister of State, revealed publicly that as of last Friday, the Superbond has been settled with the country's creditors. Here's what he had to say on the topic:

Hon. Chris Coye - Minister Of State, Ministry of Finance
"The Superbond noose no longer exists. That was canceled on Friday when the Superbond holders were paid off at a 45% discount."

Julie Robinson - Belize Program Director, TNC
"There are several agreements that are currently in place. The first is the Blue Loan Agreement. That was for the restructuring of the Superbond. So, the Superbond was 553 million. TNC came in and we provided the financing through Credit Suisse. So, Credit Suisse is the underwriter. In order to purchase back that debt at 45 cents a dollar. So, think of it as actually a 45% discount on that Superbond. So, that provided immediate debt reduction and savings to the Government of - and I'm using all US numbers here - of US 250 million dollars, straight off the bat. In addition to that - so this new loan agreement has a longer-term. So, it's a 19-year term, and that plus lower coupon rates in the early years, and just the extended term gives an overall debt service savings of another 200 million US. In the first 5 years alone, it's going to be 50 million US that the Government is going to save as part of this new deal. So, that's the Blue Loan Agreement. And that is being done through a subsidiary of TNC. So, we set up another company that's called the Belize Blue Investment Company. So, they are the ones that purchased debt essentially through the Government."

Hon. Chris Coye - Minister Of State, Ministry of Finance
"What we're dealing with now is a Blue Bond, and for Belize, really, it's simple. We don't have many bondholders. We really only have one loan. We call it an impact loan, but it's the Blue loan agreement. Under that loan, there are different components that impact what would occur. With respect to the loan, in terms of getting an interest rate as low as we were able to get it, we had to get political risk insurance through the US Government's International Development Finance Cooperation. We also got parametric insurance in the event of a natural disaster, and there are other supporting - in effect - securities, where there is a debt service reserve account. I think it's a 10 million, roughly 10 million dollars debt service reserve account. And I believe that the TNC also backed with between 20 and 30 million worth of its own investments as well as 10 and a half million into the Belize Blue Investment company. All those were sufficient enough to bring down the risk level and ultimately the cost of financing to us was reduced accordingly. It also ensured that our rating on this Blue Bond was double A-2 by Moody's."

The press then asked the two members of the head table about Belize's new repayment commitments under the Blue Bond, when compared to the Superbond. Coye told us that the country will have to find far less money to pay annually when compared to the 50 million dollars per year under the retired Superbond:

Hon. Chris Coye - Minister Of State, Ministry of Finance
"I can't give you the absolute figures, but it is entirely based on the repayment terms - I think it's for the first 9 or 10 years - is interest only. For those first 9 years, the interest rate is on a step-up basis. So, it starts off at - I think - 3.2%. So, if you take 3.2% of 360 million, that's what you'll be paying in the first year. It's gonna be less than 20 million dollars Belize, whereas, we were paying over 50 million dollars on interest alone on the Superbond. So, right off the bat, in that first year, we're saving over 30 million dollars. And then, the second year, it's 3.7%, then it goes to 5.2%, and then settles off at around 5.95%. You calculate the interest off the principal amount, and that will give you what you'll be paying on a per-annum basis, quarterly. At the end of that 10 year period, we have 9 years to pay off the principal on an even basis. So, you split it, 9 into 360, that's 40 million a year, plus the interest that accrued on a per-annum basis, and that's what you're paying."

Can Belize Suffer A Blue Bond Breakdown?

We also asked the TNC representative to discuss that extended list of conservation commitments which the Government and People of Belize have agreed to under the Blue Bonds agreement.

Belize is expected to step up its marine conservation significantly under this new agreement, and we asked TNC's Julie Robinson to explain the more important commitments on the list:

Julie Robinson - Belize Program Director, TNC
"In terms of the conservation commitments, there's a suite of them. There's a set that we call milestones, and those milestones include things like the protection of 30% of Belize's oceans. Now, when I say oceans, I want to be very specific here because we're talking about going all the way out to the 200-mile marker, including the exclusive economic zone. Currently, Belize is just under 16% protection. So, we're talking about almost doubling that. But, it's gonna be done in a way that's representative. So, right now the area that has the least amount of protection is our deep sea ocean. So those are some of the areas that we will be concentrating on. In terms of that protection, that will be done in a step-wise fashion. So, commitments like, in the first year, let's get to 20%. In year 3, let's get to 25%; in year 5, let's get to 30%. Those are some of the commitments. That will be guided by a marine spatial plan. The marine spatial plan is another commitment that the Government has made to the Nature Conservancy, which is they will initiate that marine spatial plan within the first year. We call that the MSP; the Marine Spatial Plan is the MSP. The MSP is a participatory process. It will be led by Government, facilitated by TNC, but it will be stakeholder-driven. So, that process is a lengthy process. We're planning it to be a 5-year process, and it will include all the various users of the seas. And not only the current uses like how we use our seas now, but it will also take into consideration any future uses."

"Other commitments are a little bit - I'll say - softer in the sense that these are what the Government has said that they will commit to doing, but there's no financial penalty if they don't get these done. Those include things like improving the governance for fisheries, aquaculture, setting up a framework for blue carbon, looking at watershed management. So, there's a number of different things, but I'd like to think of them as less of commitment, but more than this is kinda a partnership whereby Government, TNC, and other local NGOs and other partners have said that this is the way that we as a country want to develop our Blue Economy."

We also asked her to discuss a situation where Belize fails to meet these commitments for whatever reason. She said that there are certain grace periods built into the timelines set for the more important conservation commitments:

Julie Robinson - Belize Program Director, TNC
"I think that it will be very unlikely for Belize to not follow through on any of those commitments because these are things that we actually worked on together. But, in the unlikely scenario that they do, I would imagine it's likely due to some extraordinary circumstances. For example, we're still in a pandemic. There could be other major events that could happen that could impact the government's ability to actually follow through on those commitments."

"One of the things that we've built into the structure is to allow a grace period, for example, so that if they don't meet a commitment by a certain time, there is a grace period for Government to try and make corrections to that. However, if Government is still unable to meet those commitments, then what would happen is that there is a financial penalty, so a penalty and that amount will be held in escrow. Now, in terms of the details for how those funds would be managed, I have a financial person who would be better able to talk about the details of that."

Hon. Chris Coye - Minister Of State, Ministry of Finance
"I can speak quickly to that. In terms of those financial penalties, if they arise, those would actually get paid into the Conservation Trust Fund. So then, it actually stays in-country."

Tomorrow you'll hear about the Marine Conservation Endowment Fund.

PM Says Blue Bond Was Just Good Business Decision Making

And, this morning the PM was making the morning show rounds to boast about the Blue Bond, kind of like a blue bow on his party's one year anniversary.

And, indeed, floating that bond is a stellar accomplishment, praised the world over - but it probably wouldn't have been possible - were it not for some key exogenous factors, like…COVID, for example.

We asked the PM about it today:

Hon. John Briceno, Prime Minister
"Certainly, it's a great success, not only for government, but for the people of Belize and TNC, Credit Suisse and just as important I think our public officers who we manage to convince to be able to do a sacrifice of accepting a 10% cut and for us to be able to cut our budget by another 20%, so it was tough, it was difficult, but it is something that we can all be proud of."

Jules Vasquez
"Sir, but you have to feel at the same time that you kind have luck into it, in so far as without covid, without COP26 and all associated with it, the confluence of circumstances is what created an enabling environment for something as brilliant and revolutionary as the blue bond to go through."

Hon. John Briceno, Prime Minister
"It just means taking advantage of the opportunities that are in front of you and you do that in the business world every single day and that's what I did as the leader of this country."

Channel 7



GOB Successfully Negotiated Superbond through Blue Bonds Conservation

John Briceno – Prime Minister of Belize
Julie Robinson – Belize Program Director, The Nature Conservancy



Serial Defaulting “A Thing of the Past”

These huge savings afforded to Belize through the Blue Bond agreement is not money in hand, however. The savings are translated into significantly less public funds going towards debt repayment, and greater investments in marine conservation. So for those asking if the Briceño Administration is now able to revert to paying  teachers and public officers their full salaries, Minister Coye says we are not quite there yet. What he is more certain about is with the newly agreed to terms, Belize’s serial defaulting will be a thing of the past.

Christopher Coye, Minister of State, Ministry of Finance

“The repayment terms for the first nine or ten years is interest only. So, on that first ten years, nine years, the interest rate is on a step-up basis. So, it starts off at three point two percent. So if you take off three point two percent, three hundred and sixty million that is what you will be paying the first year. It is going to be less than twenty million dollars Belize, where we were paying fifty million dollars on interest alone on the Superbond. So right off the bat, in that first year, we are saving over thirty million dollars.”

Reporter

“Senator Courtenay had mentioned in the Senate, for the Superbond, we had been paying back and paying back and we ended up owing more, until the end of the Superbond. What guarantees are there that this won’t happen again with the Blue Bond?”

Christopher Coye

“This time around we have an actual plan to pay it off.”

Paul Lopez

“How will we find the twenty million dollars?”

Christopher Coye

“Well we were finding fifty million dollars a year.”

Paul Lopez

“We were also labeled serial defaulters, in that we weren’t finding it as fast as possible.”

Christopher Coye

“But, we paid seven hundred million and thirty dollars over the eleven years of the past administration, while at the same time increasing that Superbond principal balance.”

Paul Lopez

“So you are confident we will be able to meet those deadlines and targets, annually?”

Christopher Coye

“Yes.”

The Blue Bond agreement is backed by a six hundred and ten million dollars political risk insurance.

Channel 5


Re: The Blue Bond Explained [Re: Marty] #553859
11/10/21 06:12 AM
11/10/21 06:12 AM
Joined: Oct 1999
Posts: 82,928
oregon, spr
Marty Online happy OP

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Marty  Online Happy OP

What Will Blue Bond Fund Be Used For?

The bond was a big hit at COP 26 - because it shows a way to cure a sovereign debt problem by coming up with a conservation plan.

Last night, we showed you what Chris Coye, the Finance Minister of State, and Julie Robinson, the Belize Program Director of the Nature Conservancy, had to say about the successful launch of the Blue Bonds of Ocean Conservation in Belize.

Yesterday, these two representatives hosted a 42-minute press briefing in which they invited the media to ask any and all questions about this debt for marine conservation swap, which has allowed Belize to retire the Superbond. Our coverage yesterday focused on how this public debt restructuring allowed the Briceno Administration to settle the Superbond with Belize's creditors. Viewers also heard the representatives explain the new commitments Belize has made to honor the repayment schedule over 19 years.

Tonight, we show you what the head table had to say about the Blue Bond's Conservation Fund. It is being touted as a major part of the agreement which contemplates the establishment of a long-term source of financing for the continued protection of the country's sea spaces. Yesterday, we asked the experts on this agreement about how that conservation fund will work.

Here's what they had to say:

Julie Robinson - Belize Program Director, TNC
"This will enable us to set up a Conservation Fund, of which the Government will be making semi-annual payments that will amount to - on average - 4.2 million US dollars per year. Those funds will go towards..."

Hon. Chris Coye - Minister Of State, Ministry of Finance
"In Belize dollars."

Julie Robinson
"4.2 million US."

Hon. Chris Coye
"But paid in Belize dollars..."

Julie Robinson
"In Belize dollars, thank you, yeah - paid in Belize dollars, local currency. So let's say - 8.4 million on averages. It fluctuates from year to year, but those funds will be used, first of all, to build permanent capacity within various government - whether it's the ministries or departments, you know, Coastal Zone, Department of Environment, Fisheries Department, to build their capacity to be able to implement those conservation commitments. We cannot expect Government to implement these without having the resources. So, that's first and foremost. 40% is the strategic allocation - that's what we call it - that will go toward Government. Of course, it still has to be accountable. So, it's not as if they were just gonna get money, and then you don't have to report on anything. There are a number of safeguards in there to ensure that the funds are being used for the development and implementation of these milestones. The rest of those funds will then go toward grants programs, and those grants programs will then - there will be a call for proposals that will be issued, for example, every 6 months. And whether you're a conservation NGO, a community-based organization, or a fishing cooperative, or you're in the tourism sector, it's open and available for users of the resources, of the marine space, to be able to implement innovative ideas, things that will help Government and partner with government to achieve some of these conservation commitments, because it can't just be up to the government alone. This is really kind of an all-hands-on-deck, everybody coming together, working toward a single vision. So, that conservation financing agreement is for a term of 20 years, and then after the 20 years, you've probably heard the prime Minister talk about an endowment fund that has been capitalized at 23 and a half million US endowment fund. That, over the 20 years, will build to be over 90 million US, and then the interest from that, once the conservation funding comes to an end, from that 20-year agreement, the interest from that endowment will then continue to go into conservation, continue to go into that conservation fund, to help to maintain the capacity that Government will need, and the grants program for the other sectors."

What If Belize Fails To Meet Blue Bond Payments?

During our coverage from yesterday, the head table took on questions about the penalties if Belize fails to honor its conservation commitments.

You'll remember a little over a week ago when Senator Eamon Courtenay called out the Barrow administration for presiding over an increase in the country's indebtedness. That's despite the fact that 730 million dollars in public funds were used to make payments connected to the Superbond.

For context, we contrast those comments with the answers given at yesterday's press conference on the Superbond's replacement:

Hon. Senator Eamon Courtenay - Leader of Government Business
"When the man with the double-sided machete was elected to office, the Superbond stood at 526 million dollars, United States currency."

"Now, I would assume, that after paying three-quarter billion dollars that the thing would be lesser. Do you know when they left office what the Superbond was? 552.9 million dollars, United States currency. It went from 526 to 552.9 million, after they spent 730 million Belizean dollars in interest."

Reporter
"What guarantees that a situation like that won't happen this time around with this Blue Bond?"

Hon. Chris Coye - Minister Of State, Ministry of Finance
"Well, this time around, we have an actual plan to pay it off."

Reporter
"That would have been my follow-up question, just termed differently. You brought up the reference to the term, 'serial defaulter'. What's there to say that we will be able to find that 20 million dollars annually to actually pay back this loan so that we don't end up with the same label as 'serial defaulters'."

Hon. Chris Coye
"Right, but we paid 730 million dollars over the 11 years of the past administration, while at the same time increasing that same Superbond's principal balance."

Reporter
"So, you're confident we'll be able to meet those deadlines and those targets annually."

Hon. Chris Coye
"Yes."

Reporter
"Do you think that this opportunity presents itself where perhaps Belize's image as a serial defaulter can change?"

Hon. Chris Coye
"I would hope so, and I think that the fact that we have reached this transaction on the terms we have reached it, with the support of TNC and Credit Suisse, is indicative of that."

To reiterate, the Blue Bond has allowed the restructuring of 553 million US dollars of the country's debt, which used to be packaged together as the Superbond. The Briceno Administration asserts that this will lead to an overall debt reduction of 250 million dollars, more than US$200 million in debt service savings, and an estimated $180 million US dollars in funding for conservation over the next 20 years.

Channel 7


Re: The Blue Bond Explained [Re: Marty] #554385
12/08/21 04:59 AM
12/08/21 04:59 AM
Joined: Oct 1999
Posts: 82,928
oregon, spr
Marty Online happy OP

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Marty  Online Happy OP
Honourable Prime Minister John Briceño joins Belizean Kalilah Reynolds to take stock of Belize's Blue Bond.

The Government of Belize has conducted one of the largest debt for nature swaps in the world: getting a quarter billion US dollars of the national debt written off in exchange for certain marine protections. How did they do it? And is this a model that other highly indebted Caribbean nations can follow? I’ll speak with Belizean Prime Minister, Honorable John Briceno.



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