UPDATE 1-Belize eyes partial bond payment, shrugs at default talk

Wed Sep 19, 2012 8:02pm EDT

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* Belize plays hardball with creditors

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By Jose Sanchez

BELIZE CITY, Sept 19 (Reuters) - Belize is considering making a partial payment on its "superbond" as a sign of good faith in talks with creditors aimed at restructuring $550 million in debt, Prime Minister Dean Barrow said on Wednesday.

The tiny Central American country missed a $23.5 million interest payment on the sovereign bond in August and, according to analysts, was set to default on $550 million of debt as of Wednesday when a 30-day grace period ended.

"We have been talking about the possibility of a partial payment," Barrow told reporters, noting that he had been briefed on the status of talks with bondholders early on Wednesday.

Barrow downplayed the impact of what he referred to as a "technical default" and said he was optimistic about reaching a compromise.

"I've said that the deadline and the triggering of a technical default doesn't have any serious practical consequences. In any event, there would be extensions that are automatically built into the process," he said.

"But we are prepared to demonstrate some good faith if in turn we get from the bondholders what we consider to be reciprocity."

Representatives of a bondholder committee were not available to comment.

After the interest rate on the superbond rose to 8.5 percent from 6 percent, Belize said it could not afford to service its debt. The country is reliant on tourism, fishing and farming,

While the amount of debt in question is miniscule, analysts have argued that Belize's approach to creditors is part of a larger trend that injects uncertainty into financial markets.

Last month, the government laid out three proposals for rescheduling its bond payments, shocking analysts with its suggestion that they take a haircut of up to 45 percent on their investment.

The head of the government's negotiating team said on Tuesday that Belize was open to counter offers.

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