Belize and creditors kick off restructuring talks

NEW YORK, Dec 9 (IFR) - Talks between Belize and creditors over a potential restructuring of the country’s US$530m 2038 bond kicked off in New York this week, according to sources close to the matter.

At the meeting, officials from the Central American country indicated that they intend to move quickly to ease their debt burden, which weak growth, large fiscal and current account deficits have made harder to service.

A potential restructuring would be the third in a decade for Belize, which first consolidated its external debt into a so-called superbond in 2007 and then restructured that note by issuing 2038 bonds in 2013.

The government now hopes to amend the terms of the 2038 notes through a simple consent solicitation.

Belize officials are asking investor feedback on tweaking the terms of the 2038s to include a reduction in principal, an amendment to the notes’s coupon and amortization structure, or an extension of the final maturity, according to a statement on the Central Bank of Belize’s website.

“The government is approaching the matter with an open mind,” the statement said. “Its objective is to put the 2038 bonds on a permanently sustainable footing.”

Such changes can be approved by investors representing at least 75% of the outstanding and become binding for all holders.


Creditors however are wary of stopgap measures and are concerned that the fiscal adjustment put forward by Belize thus far may not be sufficient to steady the ship without the involvement of the International Monetary Fund.

Charles Blitzer, a former IMF staffer who is advising the creditors, said debt relief without a strong commitment to fiscal reform would do little to alleviate the country’s woes.

“It is important that another restructuring not result in merely kicking the can down the road,” he told IFR. “In my opinion, there must be a strong, and credible, fiscal program in place in order to significantly reduce future crisis risk for Belize.”

The government has proposed fiscal adjustments worth 3% of GDP for its next fiscal year but said these efforts would need to be complemented by “significant” debt relief.

Belize’s budget deficit reached 8% of GDP in 2015 and is expected to end 2016 at 5%, according to IMF estimates.

“It is a bit of a dance right now,” one of the creditors told IFR. “The government views it as too politically costly to design programs to be funded by the IMF. We are talking around those issues.”

Discussions on the financial terms of the restructuring are yet to take place, but the government is hoping that a more substantive meeting with creditors could take place before the end of the year, one of the sources said.

That would allow the government to stick to its desired timeline, according to which the consent solicitation would be launched in January and the changes would take effect no later than February 20, when the next coupon payment is due.

Such a timeframe would also allow the authorities to have a clearer picture before the budget for the 2017/18 fiscal year is submitted to the National Assembly.

The 2038 bond starts amortizing in 2019, while its coupon is set to increase from 5% currently to 6.767% on August 20 and through maturity.

Belize has retained Citigroup as a structuring adviser and law firm Cleary Gottlieb Steen & Hamilton as legal counsel.

Creditors have hired BroadSpan Capital as financial adviser and Blitzer Consulting as special adviser. (Reporting by Davide Scigliuzzo; editing by Shankar Ramakrishnan)