Can the government service the superbond?

After five months of negotiations, both the government and the bondholders are miles apart in reaching any agreement on the restructuring of the five hundred and fifty-four million US dollar super bond. So far bondholders have twice rejected proposals and counter-proposals and the government has struck out once. As it stands, the government insists that it is unable to pay while bondholders may be looking keenly at a recent IMF report that upgraded Belize’s growth potential from three point four to four percent which implies a capacity by government to service its debt obligations. A coupon payment is due on February twenty-third which represents the remaining eleven million dollars due from the August payment, plus the February payment and the interest accrued puts that figure at some thirty million US dollars. That’s seventy million dollars that the government has to find if it is going to honor the February coupon.

A report on the IFR, International Financing Review, says today that Belize is unlikely to reach agreement because it is some distance apart with bondholders. It refers to a statement by the Creditor’s committee when it rejected the government’s counter offer on December fourth saying that, “While these proposals improved on the scenarios presented in August, the Committee believes they are not yet close to acceptable burden-sharing.” The analysis from the IFR is that both sides are unlikely to have an agreement to restructure the bonds before the February payment is due. Noteworthy, is that the Creditor’s Committee has now retained the law firm of Arnold and Porter, while Cleary Gottlieb is representing the government.