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S&P downgrades Belize
BELMOPAN, Belize—Belize suffers its latest downgrade from Standard and Poor’s moving deeper into junk territory after the Dean Barrow administration announced Tuesday that it cannot meet its first payment on its foreign debt. The Washington-based international rating agency has lowered its long term foreign currency sovereign credit rating on Belize to double-C from triple-C-minus.
“‘We also lowered our foreign currency issue rating on Belize’s US$546.8 million bond due in 2029 to ‘CC’ from ‘CCC-’,”‘ S&P said in a statement. Belize was scheduled to pay US$46 million on the accumulated US$544 million foreign debt referred to as the “‘super bond”‘ due on August 20.
“‘We simply cannot afford this coupon payment given the financing shortfalls and other challenges we face,”‘ Prime Minister Barrow said, adding his administration wants to “‘move quickly toward a sensible restructuring of the instrument.
S&P noted that under its criteria, “‘a missed payment or an exchange that we view as distressed constitutes a default.”‘
The rating agency further pointed out that Belize which has per capita gross domestic product (GDP) of approximately US$4,500 had net general government debt of 68 per cent of GDP at year-end 2011 and it projected the country’s 2012 gross external financing requirements at $US210 million S&P warned that it will lower Belize’s foreign currency ratings to ‘SD’ (selective default) if the government misses its August 20 payment or if it proposes a debt exchange to investors.
An ‘SD’ rating is assigned when Standard & Poor’s believes that the obligor has selectively defaulted on a specific issue or class of obligations, excluding those that qualify as regulatory capital, but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner.
A selective default also includes the completion of a distressed exchange offer, whereby one or more financial obligation is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par
S&P, however, said if the government makes the payment and forgoes debt, Belize’s ratings could stabilise. Earlier this year, Belize suffered a series of downgrades from S&P and Moody’s Investors Service which both raised concern about the possibility of additional debt restructuring by the government.
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