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Aug 13, 2012

Oppenheimer says proposed terms significantly worse for bondholders

The feedback on the bond restructuring continues to be far from welcoming. According to a recent report by Carl Ross for Oppenheimer issued on August tenth, 2012, “The the proposed terms were significantly worse than most people expected, with a major lengthening of maturities and a drastic cut in coupon levels.” Ross estimate that the deal, as presented, is worth between twenty and forty cents on the dollar, depending on assumed post-restructuring yield attached to the Belize credit. The report outlines some of the events to watch and items to consider for those involved in the bonds. The key points are consistent with analysis and reports perspectives by several market analysis and commentaries.  That is indicating a rather combined consensus or dismissive reaction from the bondholders to not entertain or accept the significant losses in the scenarios of forty-five percent of the initial value of the bonds. Based on bondholders response, Oppenheimer’s Carl Ross states that; “These investors see neither the need nor the urgency for the scope of NPV haircut being offered by Belize, and Belize is likely to become a financial outcast in the region as a result.” Belize’s current depressing macroeconomic scenario adds more complications to the huge debt obligations as questions are raised on where and how the ‘reforms’ stated as alternative within the ‘bond restructuring scenarios’ would be achieved. The fall in foreign direct investment and the huge additional debt burden as a result of nationalizations will have an ever more negative effect on Belize’s gargantuan debt burden, emphasizes Oppenheimer’s analysis. What is also questioned is the lack of clarification on the allocation for the liabilities imposed by nationalizations and the amount of compensation within the restructuring bond scenarios. In other words, how and where are the monies stipulated for compensation being allocated within the restructuring scenarios? Oppenheimer states, “Belize fiasco is that the 2029 bond is not the main debt problem faced by the government…Rather the compensation that needs to be paid for the nationalizations, combined with amortizations due to multilateral and bilateral creditors, are the most onerous debt obligations over the next several years.” The report goes on to say, “the government unilaterally nationalized these companies, creating a huge contingent liability…it is difficult for bondholders to analyze this restructuring offer from the government without first knowing the size of the settlements to be paid to the former equity holders of the companies…”    The report reiterates consistently what many other reports have been stating with reference to bondholders, saying; “Belize’s debt problem is as much a result of their unilateral nationalizations, as well as multilateral amortizations over the next few years, than the private sector debt. Its creditworthiness will be tarnished for a very long time as a result of this action.”

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9 Responses for “Oppenheimer says proposed terms significantly worse for bondholders”

  1. Storm says:

    Is our bond negotiation team playing “chicken” with the bondholders?

    We have no winning cards in our hand, and less than a week to pay the coupon or the nation defaults!

    The team is playing with the nation’s future financial well-being, and I don’t like the way they are doing it. I think they should sit with bondholders and ask for better terms with humility and realism.

    We’re 6 days away from a cliff, and I think our team needs help, or we will all lose.

  2. Louis says:

    Belize’s “creditworthiness will be tarnished for a very long time as a result of this action.”

    All this mess in order to save a few million dollars in coupon payments. Our reputation. Our creditworthiness. OUR NATION.

    We have a very low self-esteem in Belize.


  3. Ricky Malthus says:

    Well, what do you know ! Barrow is hiding and shielding the illegal costs/payments of nationalization of BEL/BTL , the theft of $50 million from SSB, millions paid to exwife, Lois and tens of millions more siphoned off to relatives by rolling over these costs into the restructuring. This is blatant thievery and corruption. But already we know that the creditors have rejected their idiotic unilateral proposals/scenarios. What is abundantly clear here is the demonstration that both Mark Espat and Dean Oliver Barrow have very shallow intellectual quivvers.

  4. Rod says:

    We need to put this guy barrow on a plane to Miami beach and never let him come back talk about thief no wonder the country of Belize is in a failed state we have the supposed leader of the country stealing openly and allowing anyone in the country to do the same Belize is truly in the dirt box now and still you belizeans sit at home and take and take wake up belizeans march to this pm house and put him on a plane to nowhere and where is he while people are being murdered and raped he is on Miami beach spending your hard earned money while your children are being murdered andraped.

  5. Louis says:

    Storm, there is a 30-day grace period according in the Superbond contract. So GOB has until September 19th to pay.

  6. Storm says:

    That’s a little relief to hear, Louis. Do YOU think our team will solve the crisis with that extra time? The debt has been on the calendar for years and it seems GOB has done nothing effective to deal with it yet. But hope springs eternal.

  7. Indy says:

    While I agree with Ricky- I wouldn’t not be using strong words as “thievery” (not sure if its a word). The Belize government have paid $M to those lawyers, which have failed majority of the time. I am sure Mr Barrow, Fonseca, Musa and others have money outside Belize just in case Belize falls through. I applaud Mr Espat for stepping in despite criticism and for having an open mind, Belize is first and not a party.

    Belize is at the peak of the ice berg and it is just a matter of time. Environmentalist have shut the possibility of the government to dig for my black gold and have offered no solution for economic development. I love the earth, love nature and I have fond memories of growing up among it. But the reality is we must learn how to coexist.

  8. Louis says:

    Today they announced that they wont be paying the coupon on Aug 20.

    If Barrow defaults, that will be his own demise as PM.

  9. Louis says:

    ……. With a default keeping money in the banks isn’t safe.

    In Argentina, with the announcement of default, people pulled the money out of the banks and bought U.S. Dollars and saved themselves from what came next: the actual default, and people getting their money out of the banks all at once. Of course, banks didn’t have the money all at once to pay everybody.

    This eventually led to a banking crisis and a devaluation of the currency. It was known as the “corralito”.

    Imagine the exchange rate at 4 BZ$ per 1US$. We will all be very poor. We should act before that happens.

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