Oppenheimer’s Carl Ross weighs in on the Superbond restructuring

Carl Ross

Still on the Superbond, the Prime Minister said on Wednesday that he was hoping that negotiations on the restructuring of the five hundred and forty-four million dollar Superbond would be successful to prevent a default. He also said that there was no source of financing to meet the twenty-three million U.S. dollar coupon that was due on Monday. The prime minister’s words are under the microscope in financial circles. This afternoon, Carl Ross of Oppenheimer gave his perspective.

Andrea Polanco

“The reaction from the bondholders committee is negative; would you like to comment on the possibility that if no agreement is reached within the thirty days grace period, what are the possible steps that they are looking at?”

Carl Ross, Managing Director of Investments, Oppenheimer

“I probably shouldn’t comment on that, if that happens it’s gonna depend on the status of the situation at that time. So it is possible that if September nineteenth comes around and the grace period is over with, but maybe some progress is made on the negotiation, in reaching the settlement. We always deal with interest default, you can always deal with that by perhaps the country making a part payment to bond holders in lieu full payment or adding that payment in the form of Past Due Interest or PDI on top of the principle or some combination thereof, so I think it kinda all depends. So if September nineteenth comes and goes and the payment is not made and the grace period is over and the parties are not even remotely reaching a settlement then I think you’re probably going to see some litigation begin and it’s just gonna be unfortunate for everybody.”

According to Carl Ross, in the instance of a default, litigation would be initiated by bondholders and the lawyers would be laughing all the way to the bank.

Andrea Polanco

“Now, in whose court would you say the ball would be in should the law suit follow?”

Carl Ross, Managing Director of Investments, Oppenheimer

“Well then it just becomes back and forth where lawyers are making all kinds of money and booking all kinds of hours and then it costs everybody money that is unnecessary I think. In whose court the ball is at that point I would think that the litigation would be initiated by the bondholders and they would contact the trustee and ask the trustee to accelerate the bonds and the Government would say well we can’t pay these bonds so therefore they will be declared in default, formally, and that would probably be the first move of the bondholders and then the Government would then respond to that.”

Andrea Polanco

“Belize’s credit ratings have been slashed again to a selective default from double –C by S& P and Moody’s Investors Service on Tuesday changed the outlook on Belize’s ratings to negative. What’s your perspective on that as it relates to the current situation with the bondholders and the coupon payment?”

Carl Ross

“These downgrades, I mean Belize is already as low as you can get on a ratings scale and these rating changes, especially the one by S&P, to selective default; that’s for all intention purposes, just for an administrative change because Belize has kinda fallen so low on the rating scale and that further rating downgrades and so on don’t mean much, they are largely symbolic at this point.”

Andrea Polanco

“At what point can we say that there is clearly a default because at this point they have up to the nineteenth of September but I think he has made it explicitly clear that there is no money even in the near future?”

Carl Ross

“Well, I think that is why S&P took a decision to downgrade it to default status. It is true that legally or formally the country is not in default until the grace period is over and until the bondholders as a group ask the trustee for that bond to basically declare that Belize is in  violation of the terms of the bond issue, and declare it formally in default, okay. From a semantic sort of technical standpoint, Belize has only missed a payment; we’re in the grace period so it’s not technically in default. All of the body language coming from the Government suggests that they have no intention of paying and they have strong intention of revising the bond contract drastically. So that’s where we are, they are not formally in default yet but defacto they are; so I don’t know how else to say that, it’s just largely semantics at this point.”