The debt clock is ticking on the Barrow Administration and its attempt to restructure the external debt bundled as the $530m Superbond for a second time in just four years. Last year, the Government announced that due to economic conditions and a severe financial crunch it would not be able to meet the next payment to bondholders due in February. Therefore, the Government has reached out to bondholders seeking, once again, a bit of mercy. But mercy may come with a price, as the Committee formed by bondholders to negotiate on their behalf has not budged in Government’s favour.
Those terms include amending the bond’s amortization schedule and lowering the coupon payments. GOB has proposed that the interest rate be cut from 5% to 4% per annum starting February 20 up to maturity. Under the current terms, the bond payments carry an interest of 4% with a step up to 6.76% starting on August 20th.
The Government is also proposing a different schedule for payment of principal from the current 38 semi-annual instalments that start in 2019 to three equal amortizations on February 20 of 2036, 2037 and 2038. To lure the bondholders the Government is offering to pay them a consent fee of 0.25% of the face value, if they agree.
While the deal seems sweet, it apparently isn’t sweet enough for the committee of bondholders because they have already rejected the proposal. A report by Reuters News agency quotes the Committee as saying that the terms would reduce the net present value of the bond by over 40%.
The Committee noted that the economic measures proposed by the Government are [quote] “unlikely to reduce future risks to debt sustainability or to the stability of the country’s currency peg in a sufficient manner” [unquote]. Furthermore the Committee recommended that Belize seek technical assistance in developing a home-grow adjustment program that would be endorsed by multilateral lenders.