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S&P: Belize in default despite partial payment
The Standard & Poor’s (S&P) ratings agency said late Friday that its selective default (SD) foreign currency rating on Belize and its ‘D’ rating on Belize’s bond due in 2029 remain unchanged following the government’s partial payment of US$11.7 million on Thursday.
According to S&P: “Although the terms of the 2029 bond include a 30-day grace period for interest payments, our ratings speak to full and timely payment. They also address debt exchanges that we view as distressed. By either measure, the government remains in default, based on our criteria. Rescheduling negotiations between the government of Belize and holders of the $547 million bond due in 2029 are ongoing.
Once the likely rescheduling terms become clearer, we will publish our expectations for a postdefault foreign currency rating. Of the rated sovereigns that have emerged from default during the past 15 years, postdefault ratings typically have ranged from ‘CCC’ to ‘B’.”
Belize won a 60-day reprieve from bondholders on Thursday after paying half an overdue interest payment, delaying any potential legal action and sidestepping a full-blown default. Belize paid US$11.7 million in interest to creditors as a 30-day grace period on its missed coupon payment expired, but bondholders said they were happy with the payment.
“The government’s decision on the coupon payment was taken in consultation with the (bondholder) committee and we consider it a material and good faith step in the right direction,” said AJ Mediratta of Greylock Capital Management, co-chair of the committee representing the majority of bondholders.
That show of goodwill prompted creditors to agree to refrain from taking legal remedies against Belize for 60 days, to allow restructuring negotiations on the US$550 million superbond to continue. “We view these latest developments in a positive light, as both parties seem to have begun negotiations in good faith,” Nomura strategist Boris Segura said. “Let’s see if 60 days is enough for a negotiation process that has not been smooth so far.”
The government has laid out three proposals for rescheduling its bond payments, shocking creditors with its suggestion that they take a haircut of up to 45 percent on their investment. But now bondholders hope that an agreement that balances the interests of both parties could be reached in the near term, said Mike Gerrard of BroadSpan Capital, financial adviser to the committee.
The government of Belize missed an approximately US$23 million coupon payment due on Thursday. Although the terms of the 2029 bond include a 30-day grace period for interest payments, S&P said that its ratings speak to full and timely payment. Belize’s government, which had said originally it did not have enough money to pay the interest on the bond, said in a statement it had agreed to a common framework with creditors to push along negotiations.
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