Belize’s grace period ends on its debt default

Belize officially defaulted on its international debt obligations yesterday (September 19) when it failed to make the US$23.5 million interest payment that it had outstanding on its sovereign bonds. 

After the interest rate on its so-called “superbonds” rose to 8.5 percent from 6 percent, Belize said it could not afford to service its debt a fandiled to make the payment to creditors when it was due on August 20. However, Belize had a 30-day grace period to make a payment on theUS$544 million worth of bonds before it became officially registered as a default.

Despite now officially in default, the Caribbean country and its creditors are still trying to reach an accord and Prime Minister Dean Barrow has offered the possibility that creditors might still receive something.

"We have been talking about the possibility of a partial payment," Barrow told reporters, noting that he had been briefed on the status of talks with bondholders early on Wednesday.

Barrow downplayed the impact of what he referred to as a "technical default" and said he was optimistic about reaching a compromise.

"I've said that the deadline and the triggering of a technical default doesn't have any serious practical consequences. In any event, there would be extensions that are automatically built into the process," he said.

"But we are prepared to demonstrate some good faith if in turn we get from the bondholders what we consider to be reciprocity."

The government is holding talks with a creditor group that holds more than US $300 million of its debt. 

Last month, the Barrow administration laid out three proposals for rescheduling its bond payments that amounted to creditors being asked to take a haircut of up to 45 percent on their investment.

Bank of Nova Scotia and Citigroup Inc. said the three proposals give the securities a net present value of about US$0.20, the least among 16 sovereign debt restructurings since 1998.

 

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Date Posted

September 24 2012