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Feb 17, 2017

Will Government Default Superbond Payment?

Turning to economic news…Belizeans await the return of Prime Minister Dean Barrow from New York City, where he is meeting with Belize’s legal and financial team over the Superbond. But it is not looking good for the third restructuring of the superbond and there is a likelihood that Belize will default in the February payment. While the Consent Solicitation Offer for the ongoing renegotiations remains open until next Friday, February twenty-fourth, on Monday, February twentieth, the next payment of twenty-six million Belize dollars is due and Government is risking it all by threatening not to pay.  The Government had sought an early deal with creditors to reduce interest expense and delay the repayment of the principal but bondholders have refused, stating that “the proposed adjustment program [outlined by the Government of Belize] is unlikely to reduce future risks to debt sustainability or to the stability of the country’s currency peg in a sufficient manner.”   Interest payments are due to increase by nine million Belize dollars for this calendar year, 2017, as the interest rate escalates in August from five percent to six point seven-six-seven percent.  The total tab for interest payments on the superbond would, therefore, increase from fifty-three million Belize dollars to sixty-two million, according to official information.  The first two extensions on the offer to bondholders were issued for one week in each instance, but this third extension is being granted for two weeks. The Government is asking bondholders to concede to two changes in their repayment agreement: one proposal it has put on the table is to extend the amortization schedule of the bonds to make the outstanding principal repayable in three equal, annual instalments starting in 2036 rather than 2019; the other is a reduced interest rate of four percent per annum until the final semi-annual payment due in 2038. Belize has said that financial exigencies had caused it to seek debt relief in what represents the third restructuring of the bond in a decade. Belize has said that the super-bond constitutes the single largest category of public debt.

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