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Aug 10, 2012

Will bondholders take the new options?

A few bond restructuring options have been posted on the Central Bank of Belize’s website. And according to a research analyst, there are default concerns. The yield on the bond in its current form, jumped three point five percentage points to twenty-three point four percent after the announcement of the three options, which suggest that bondholders lose forty-five percent of the initial value of the bond.  Brief analysis and tracking of the bond continues to indicate that the value of Belize’s dollar bonds continues to fall and the default risk seems higher. Over the last month, the value of the bonds fell two point five percent and its yields climbed one hundred and forty-five basis points to twenty-point eight over the past month. The yields have climbed eight hundred and seventy-two basis points from a year ago. According to a report, the proposal is viewed as even more negative for bondholders than had been expected.  The lead negotiator for the bondholders maintains, in recent reports by Bloomberg, that they will not entertain or accept a discount on the present value of the bond. Accordingly, when the three restructuring options were released, bondholders retained their ‘Sell’ recommendation. After continuous downgrades of the bonds to junk status, Moody’s Investors service cut Belize’s credit rating for a second time this year on June first to Ca; that’s ten levels below investment grade, citing weak growth among other detrimental factors.

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10 Responses for “Will bondholders take the new options?”

  1. Louis says:

    Will bondholders take the new options?

    Of course not. Why keep asking the same question?

    No Belizean would take any of these options either.

  2. Storm says:

    Maybe GOB should consult with some international experts in matters like this. They are dealing with the financial future of the Jewel for the next two or three GENERATIONS — not just your children, not just your grandchildren, but your GREAT grandchildren will be burdened by these decisions. We will have nearly a lost CENTURY, falling behind the rest of the Caribbean economically. How important is it to you that GOB get this right?

    So far, it looks like GOB is getting it wrong, in that the bondholders are offended by our proposals.

    The stakes are too high to let amateurs negotiate and get “on the job training” at the cost of the future of the nation.

    10 days and we are in default if we cannot reach a modification. We’d better prepare to tighten our belts to our backbones then, because there will be no more loans to GOB. We’ll be living cash and carry then, with our money under our mattress.

  3. Storm says:

    I should add, my other comments on this article are not to impugn the intentions of the bond renegotiation team. I assume they are trying their best to cut a good deal for the nation. But our backs are against the wall, and there is no room for mistakes. We really need the best minds in the world to help us find a solution that we can live up to, and the bondholders will grudgingly accept.

    Rejection by the bondholders will be disaster for us, and making a deal we really cannot honor — again — will just prolong our national agony.

  4. Ricky Malthus says:

    Do you see all the residential and business foreclosures by the banks in Belize? Have you heard or seen these these foreclosed property owners dictating to the banks the terms and conditions to repay their loans? The answer to both question is No, NO, NO and NO. So the bond holders will accept nothing less than full legal compliance by the Belize government to repay what is owed. Sorry Barrow there is no write off here, nor will these bondholders pay you like you pay the gangs not to harrass them or cajole them to submit to your will. Most financial experts I know and discuss this situation fail to see Barrow’s rationale in this entire debacle. So this affair has taken on its own life but for lack of expert management. So the short term answer to bondholders accepting the government offered scenarios is no; the long term answer is no. So Barrow as minister of finance has to decide . Maybe he can call on minister Godwin Hulse for his vapid advice.

  5. BMNJ says:

    Ricky Malthus, you said it right. Maybe the GOB should take back the lands that were given to those ‘not ordinary people’ and sells them at market value to assist in the loan payment. Moreover, when speaking of foreclosures, I think both the PUP and UDP need to be foreclosed because both are incompetent.

  6. Louis says:

    Storm, and making a deal we really cannot honor — again — will just prolong our national agony.

    Belize is a wealthier nation than you might realize. Of course Belize can pay the US$23 million coupon. We have over $520 million in international reserves.

    Barrow doesn’t want Belizeans to know how much money there is in the central bank. You know why.

    This debt negotiation is unnecessary.

  7. Concerned says:

    Unlike foreclosures, the bondholders cannot seize anything of value to get their money like a bank can seize property and resell to get its money. So doesn’t it stand that neither the bondholders or GOB wants a default because no one wins. Its plausible to me that an arrangement will be met because the bondholders would not just want to loose everything when there is a possibility to get something if they were to work with GOB. I am thinking this is just tough talk and bullying. Remember Greece will pay .53 cent to the dollar or less to their bondholders.

  8. Louis says:

    Concerned, that is not correct. Greece has paid ALL her bonds issued under International Law, and defaulted only on bonds issued under local Greek law.

    The reason for this is that under international law, creditors can seize foreign assets of Greece. The same would happen to Belize if there is a default because the Superbond is issued under International Law.

    Since the Superbond is issued under New York law, bondholders would seize belize oil shipments, oil money, international payments, and other international transactions.

  9. Louis says:

    Concerned, even the Wall Street Journal is talking about it negatively. And most investors DO READ the Wall Street Journal.

    “The restructuring of the US$543.8 million in outstanding debt could have devastating consequences on the country’s long-term economic health if it spooks investors.”

    “If there is not an amicable restructuring, I think Belize is going to be shut out from international capital markets,” Mr. Segura said. “It’s something they need to analyze.”

  10. Initiate says:

    Learned friend Louis, can you give us unexperienced readers an example where international law has seized oil shipments, oil money, internaiontional payments, like maybe 2 or 3 clear relevant examples please?

    This is a bit interesting.

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