NEW YORK, Dec 9 (IFR) - Talks between Belize and creditors
over a potential restructuring of the country's US$530m 2038
bond kicked off in New York this week, according to sources
close to the matter.
At the meeting, officials from the Central American country
indicated that they intend to move quickly to ease their debt
burden, which weak growth, large fiscal and current account
deficits have made harder to service.
A potential restructuring would be the third in a decade for
Belize, which first consolidated its external debt into a
so-called superbond in 2007 and then restructured that note by
issuing 2038 bonds in 2013.
The government now hopes to amend the terms of the 2038
notes through a simple consent solicitation.
Belize officials are asking investor feedback on tweaking
the terms of the 2038s to include a reduction in principal, an
amendment to the notes's coupon and amortization structure, or
an extension of the final maturity, according to a statement on
the Central Bank of Belize's website.
"The government is approaching the matter with an open
mind," the statement said. "Its objective is to put the 2038
bonds on a permanently sustainable footing."
Such changes can be approved by investors representing at
least 75% of the outstanding and become binding for all holders.
NO TO STOPGAP
Creditors however are wary of stopgap measures and are
concerned that the fiscal adjustment put forward by Belize thus
far may not be sufficient to steady the ship without the
involvement of the International Monetary Fund.
Charles Blitzer, a former IMF staffer who is advising the
creditors, said debt relief without a strong commitment to
fiscal reform would do little to alleviate the country's woes.
"It is important that another restructuring not result in
merely kicking the can down the road," he told IFR. "In my
opinion, there must be a strong, and credible, fiscal program in
place in order to significantly reduce future crisis risk for
The government has proposed fiscal adjustments worth 3% of
GDP for its next fiscal year but said these efforts would need
to be complemented by "significant" debt relief.
Belize's budget deficit reached 8% of GDP in 2015 and is
expected to end 2016 at 5%, according to IMF estimates.
"It is a bit of a dance right now," one of the creditors
told IFR. "The government views it as too politically costly to
design programs to be funded by the IMF. We are talking around
Discussions on the financial terms of the restructuring are
yet to take place, but the government is hoping that a more
substantive meeting with creditors could take place before the
end of the year, one of the sources said.
That would allow the government to stick to its desired
timeline, according to which the consent solicitation would be
launched in January and the changes would take effect no later
than February 20, when the next coupon payment is due.
Such a timeframe would also allow the authorities to have a
clearer picture before the budget for the 2017/18 fiscal year is
submitted to the National Assembly.
The 2038 bond starts amortizing in 2019, while its coupon is
set to increase from 5% currently to 6.767% on August 20 and
Belize has retained Citigroup as a structuring adviser and
law firm Cleary Gottlieb Steen & Hamilton as legal counsel.
Creditors have hired BroadSpan Capital as financial adviser
and Blitzer Consulting as special adviser.
(Reporting by Davide Scigliuzzo; editing by Shankar