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Jan 19, 2017

Will Government Succeed with Superbond? Business Community Not Sure

The Superbond has been on everyone’s minds this week. The Government has been told by bondholders that without a medium-term plan to address credit risk in light of the third restructuring in a decade, they would not consider the plan presented to them for restructuring. While Government has committed to giving the bondholders what they have asked for, Senator for the business community Mark Lizarraga, a long-time proponent of smarter, more conservative fiscal management, says we must all hope that the Government succeeds – and has learned its lesson.

 

Mark Lizarraga

Mark Lizarraga, Business Community Senator

“The business community has always been concerned about our national debt, and any growth in that national debt. It is our understanding that if for some reason the Government defaults on its commitment under the present bond structure, that a penalty will be applied of some eleven percent. This would mean that there would be upwards of fifty million dollars more added to the value of the Bond. Of course we would want to see the Government successful in any of its negotiations, but also we must keep in mind that the last time the Bond was renegotiated, it wasn’t a bad deal for the bondholders – because what the Government really did, was extend the period over which it was going to pay for the Bond, but the quantum at the end of the day was more burden for the taxpayers to pay; in other words, they got some cash flow reprieve, but at the end of the day the quantum that we were to pay ended up being more. We are hoping that we don’t see something like this but we are still questioning what motivation the bondholders have to renegotiate – why would they want to re-negotiate, really, unless it was for a better deal for them? We will watch this very closely and of course hoping that Government can achieve some cash flow reprieve, but as well some significant savings, and we really don’t see the bondholders being motivated to move in that direction, really.”

 

The Belize Bonds have been trading on the international market for just forty cents on the dollar, making them near worthless in some views. Lizarraga says the Chamber of Commerce will present its own plans to Government for fiscal rebalancing in the near future.

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