Prime Minister, Rt. Hon. Dean Barrow, announced on Wednesday March 8, that by Friday of this week a final agreement should be worked out with the holders of the Superbond. The Government of Belize was negotiating over the past couple of weeks with a creditor committee which represents 61 percent of the bond holders, they along with the Venezuela government which holds 8 percent of the bondholding are in agreement with the new bond and this is now encouraging government that they will be able to get the 75% of the bondholders to agree to the new bond terms.
Ambassador Mark Espat, who was part of the negotiating team simplified what the new terms of the Bond will be. “The net present value of the new bonds will be 25% less than they are right now, that is 85 million U.S. dollars or 170 million Belize.” He added that, “this is a combination of a 27 percent reduction in interest rate from 6.767% to the 4.9375%. It means that between August of this year and August of 2019 when the principal repayments were to start we will pay out 40 million dollars less in that period in interest.” Espat noted that over the duration of the bond the Government of Belize will pay 53 million dollars less in interest throughout the term of current bond compared to the new one and we will pay 600 million Belize dollars less between 2019 and 2030 in principal payments. The life of the bond will be extended from 11.8 years to 15 years. During the 11 year period there will be no principal payments.
Before the announcement was made, Prime Minister Barrow went into the history of the bond, he went into detail explaining how the original Superbond was arrived at (see page?). He also explained that this second renegotiation followed one in 2013 which had seen a 10% haircut or 108 million written off the original bond ending with a bond of 526 million with a 25 year maturity. That bond also featured interest rates of 5% interest for the first 4 and a half years and stepping up to 6.788 for the remaining life of the bond. It also had a 6 years grace period before principal repayments were to be made and all interest accrued as of the date of the closing was capitalized.
For the new bond PM Barrow noted that there were very little concessions given even though the bondholders had asked that any money gotten from the sale of shares in BTL to the Social Security Board be committed to the bond holders, to this the answer was no. There was also a request that the Government get into a Stand-By arrangement with the IMF or to have the bond creditor committee act as a fiscal board for the government, that too was rejected. P.M Barrow expressed that during the course of the negotiations there were contentions but these were never rancorous. His position and that of the government’s was that the bond payments were unsustainable and it was a choice on whether to make it sustainable or not make payments. The Prime Minister was emphatic that his position was always to get the best deal with him telling the bond holders that he had to “bring home the bacon,” and with that an insistence that interest rates be under 5% which was ultimately achieved.
Of note is that under the present arrangement the semiannual payment of $13,855,318.42 was going to go up to $17,814,198.55 a year and in 2019 the government would have had to start paying amortizations of $31,669,516,97 U.S. by August of 2020. That would have meant that GOB would have had to be paying 17,345,403.45 in interest plus the 31 million dollars a year from 2020 to 2038.
