Creditors question Belize's debt sustainability concerns

Aug 30 (IFR) - Creditors are asking the government of Belize to justify its restructuring proposals in light of what they see as contradictory information released earlier this year and a December IMF report that did not express any concerns about debt sustainability.

"In the absence of comprehensive and consistent information, we are relying on the IMF Article IV published last December," said a source close to the credit committee. "This report, which was issued in consultation with the Belize Government, did not even raise a concern about debt sustainability, so the committee is understandably curious about what has changed."

Belize missed a US$23m coupon payment on August 20, days after Prime Minister Dean Barrow said the country would be unable to make the payment.

Creditors are still waiting for a formal response to proposals that could see them take a haircut of up to 80% on the net present value of their holdings. The government has until September 19, when the grace period ends.

"We still have hopes it will be a 2012 restructuring, but that will need accommodation from each side," said Sebastian Espinosa, managing director of White Oak Advisory, which is advising the government.

At the moment, the two sides appear to be far apart. The situation is exacerbated by approximately US$300m in additional liabilities in the form of compensation due to former shareholders of Belize's electricity and telecoms companies, which were nationalized between 2009 and 2011.

No settlement has yet been reached with these claimants, and the government wants to roll their claims into a wider debt restructuring.

"In June, when it first released substantive information, [the government] pointed to the cost of the nationalizations as precipitating the need for a restructuring," said the source from the credit committee. "However, in August, it said the nationalizations were not the reason. This is a critical issue and yet nothing has been made clear."

Belize has outlined three options to replace the so-called superbond. One is a 2% bond maturing in 2062 with no principal reduction and a 15-year grace period. The others involve a 45% reduction of principal, but a 2042 maturity. One has no grace period and a step-up coupon from 1% to 2% in 2019 and 4% in 2026, and the other a 3.5% coupon after a five-year grace period.

The 2029 bonds currently trade at 35-40 cents on the dollar, suggesting the market believes that Belize will improve the terms by a significant amount. However, one senior portfolio manager was skeptical last week, saying the final offer could be nearer 20 cents on the dollar.