Belize debt restructuring: 2007 vs 2012 - Moody's Global Credit Research

Belize debt restructuring: 2007 vs 2012

Belize debt restructuring: 2007 vs 2012 - Moody's Global Credit Research
Belize debt restructuring: 2007 vs 2012
Published Sep 30, 2012
4 pages (2498 words) — Published Sep 30, 2012
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Brief Excerpt:

... financing both fiscal and external deficits); significant debt overhang Effective interest rate of around 7.8% on government debt (more than 11% on external commercial debt) in 2005 Expected financing shortfalls from liabilities arising from nationalization of two utility companies and declining oil revenue; significant debt overhang Effective interest rate of around 4.4% on government debt in 2011, coupon on sole external commercial bond rose to 8.5% in 2012 Trigger Restructuring driven by economic necessity rather than willingness to pay The government faces some immediate financing gaps, but is accelerating medium-term solvency issues Willingness to pay is center stage; restructuring escalated from a campaign promise during the 2012 election; government does not face a liquidity crunch and solvency issues are more medium- term Restructured instruments Private external foreign currency debt instruments (6 international bonds with maturities...

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Issuer Comment

Belize, Government of
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Moody's Upgrades Belize to Caa2 With a Stable Outlook - Rating Action – 2013/04/15 – US$ 180.00 – Global Credit Research Rating Action 15 APR 2013 Rating Action: Belize, Government of Moody's Upgrades Belize to Caa2 With a Stable Outlook New York, April 15, 2013 -- Moody's Investors Service has upgraded Belize's government bond...

Belize Debt Restructuring Fails to Resolve Credit Challenges - Issuer Comment – 2013/03/18 – US$ 200.00 – ...On March 8, the government of Belize (Ca negative) announced that holders of 86% of the country's US$ 547 million "Superbond" due in 2029 had accepted its debt exchange offer. The exchange caps a debt restructuring process that followed Belize's default on its external debt last year ¡ the country's second since 2007 (see Belize Debt Restructuring: 2007 vs. 2012). While the restructuring will reduce the government's medium-term financing needs due to lower interest rates on the new bond (Exhibit 1), government debt remains largely unchanged at around 75% of GDP. Having committed to a comprehensive debt restructuring, it was important to achieve more than just temporary liquidity relief for a material improvement in the government's credit quality. This restructuring did not do so (see Belize Debt Restructuring Update: Government's Bargaining Position Weakens). The debt overhang remains, dampening the outlook for post-restructuring debt sustainability and medium-term growth prospects. Critically,...

Belize's Pay Raise for Public Sector Employees Is Credit Negative - Issuer Comment – 2013/02/07 – US$ 200.00 – ...On 2 February, the government of Belize (Ca negative) and public sector unions agreed on a salary plan that will increase the government's wage bill by up to 10% per year for three years starting in 2014. This development is a credit-negative departure from the government's commitment to fiscal consolidation. Belize is in the process of finalizing restructuring terms for a $547 million sovereign bond maturing in 2029 that accounts for about 50% of the central government's total debt. The government and creditors reached an agreement in principle in late December and we expect a formal offer this month. Following the restructuring, Belize's second since 2006, the government will face restricted access to external financing. International capital markets will remain prohibitively expensive and disbursements of multilateral funding from sources such as the Inter-American Development Bank will be slow to materialize as a result of Belize not benefiting from International Monetary Fund oversight....

Belize's Revised Debt Restructuring Offer Is Credit Positive - Issuer Comment – 2012/12/03 – US$ 200.00 – ...Last Thursday, the government of Belize (Ca negative) offered a revised set of indicative restructuring scenarios to holders of its $547 million bond due in 2029. Although the government has yet to finalize a formal debt exchange offer, the revised scenarios, which softened relative to the initial restructuring scenarios released in August (see exhibit), inflict smaller losses on investors and increase the odds of a successful debt exchange, a credit positive development that would provide Belize with much-needed liquidity relief....

Belize Debt Restructuring Update: Government's Bargaining Position Weakens - Issuer Comment – 2012/11/29 – US$ 200.00 – ...The government of Belize (Ca, negative outlook) continues to face headwinds in its efforts to restructure the country's external debt (see Belize Debt Restructuring: 2007 vs 2012). From our perspective, the following dynamics have combined to weaken the government's leverage vis-a-vis holders of Belize's $547 million bond due in 2029. + Uncertainty about the size of the government's financial obligations. Between 2009 and 2011, the government nationalized two utilities: Belize Telemedia Limited (BTL) and Belize Electricity Limited (BEL). Compensation for these nationalizations is an on- balance sheet sovereign liability that is central to the government's estimates of financing shortfalls that triggered the default. Cost estimates for the expropriations range between $85 and $450 million (roughly 6 and 30% of forecast 2012 GDP). The uncertainty stems from ongoing litigation challenging the constitutionality of the nationalizations, which reached the final stage of the domestic appeals process...

Belize's Sovereign Bond Restructuring Will Impose Severe Losses on Investors - Issuer Comment – 2012/08/15 – US$ 200.00 – ...On Tuesday, the government of Belize (Ca developing) announced that it would renege on an 8.5% coupon payment due on 20 August on the country's $547 million sovereign bond maturing in 2029 (the Superbond). The announcement follows the release last week of a set of scenarios for restructuring the Superbond, all of which impose severe losses on bondholders. The government's willingness to trigger a credit event and force investors to take a deep haircut is credit negative. By timing the release of the proposed restructuring terms so close to the coupon payment date, the government has increased its leverage in negotiations with creditors, as bondholders must either negotiate and settle on something that resembles the government's proposed terms, or face the consequences of the government defaulting. The government needs to secure the agreement of 75% of investors to invoke the Superbond's collective action clause to compel remaining investors to participate in the exchange, and this week's...

Belize - Analysis – 2012/07/05 – US$ 750.00 – ...Moody's Ca foreign currency government bond rating for Belize reflects the country's relatively low level of economic development, poor short- to medium-term growth prospects, weak institutions, accumulating contingent fiscal liabilities, and deteriorating debt sustainability metrics. A key driver of our analysis is the pre-emptive restructuring of external public debt triggered by the government following their re-election in March 2012. The government's capacity to service its debt is weakened by declining oil-related revenues, and it is preparing to absorb materializing fiscal liabilities stemming from litigation over compensating investors for the nationalization of BEL (electricity distribution) and BTL (telecommunications) between 2009 and 2011, estimated to be as high as 25% of 2012 GDP. Additional contingent liabilities stem from the weak domestic banking system: non- performing loans continue to escalate and are close to 20% of total loans, the highest in the region. We view recent...

Moody's downgrades Belize to Ca from Caa1 - Rating Action – 2012/06/01 – US$ 180.00 – Global Credit Research Rating Action 1 JUN 2012 Rating Action: Belize, Government of Moody's downgrades Belize to Ca from Caa1 New York, June 01, 2012 -- Moody's Investors Service has downgraded Belize's foreign currency government...

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Moody's Global Credit Research. "Belize debt restructuring: 2007 vs 2012" Sep 30, 2012. Alacra Store. Jan 23, 2020. <>
Moody's Global Credit Research. (). Belize debt restructuring: 2007 vs 2012 Sep 30, 2012. New York, NY: Alacra Store. Retrieved Jan 23, 2020 from <>
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