7 News Belize

Almost Out Of Superbond-age: Belize Gets Ready To Launch Bond Offering
posted (February 12, 2013)
The Superbond 2.0 is days away from launching and - if everything goes as planned - weeks away from being finalized. The final terms were announced today at the House of Representatives where the only business was the Government of Belize External Debt Restructuring Motion.

In presenting the bill, The Prime Minister - as Minister of Finance outlined the terms of the offer for the new bonds valued at over a billion Belize dollars and maturing over 25 years.

Prime Minister Dean Barrow
"A 25 year maturity ending in 2038. This is 9 years more than the current maturity under the super bond which expires in 2029, so there is 9 years more and the new bonds have a maturity trajectory of 25 years to expire in 2038. Second key feature Mr. Speaker, there is a 10% principal haircut off the top, so immediately approximately BZ$108 million dollars is to written off the current super bond indebtedness."

"Third, Mr. Speaker. The initial interest rate coupon is for 5% lasting for 4.5 years stepping up then to 6.788% for the remaining life of the new bonds. Recollect that the present interest rate under the super bond is 8.5%. Now Mr. Speaker the estimate of debt service reductions resulting from the new terms negotiated by GOB are as follows: BZ$22 million dollars in 2012; BZ$66 million dollars in 2013; BZ$236 million dollars during the 5 year period 2013-2017 and BZ$494 million dollars during the 10 year period 2013-2022. The deal we have negotiated see us come out finally at a net present value 56.75 cents on each super bond dollar or a reduction in net present value terms of over 43%."

"Even at the price of losing the partial IDB guarantee that we sought this government resisted the proposal/preposition of an IMF program notwithstanding the pressures brought to bear on us by the US Treasury by the IMF itself and by the other IFIs. This would have surrendered Belize's fiscal and monetary independence and would have meant higher taxes and public service coffers."

Hon. Francis Fonseca
"Their approach has been secretive. It has been arrogant. It has been reckless and it has been divisive. Absolutely no information Mr. Speaker has been shared at any point during this process with any member of the Opposition. In fact the Prime Minister publicly boasted that he would not be sharing any information with the Opposition. He publicly declare his intention and offered an undertaking to support this intention at his press conference to have the renegotiating team appeared before the finance and economic development committee of the House of Representatives to brief that committee on the progress of the restructuring exercise. But like so many of the promises and commitments made by this Prime Minister over the past five years this turn out to be just empty press conference rhetoric. He never intended to keep that commitment and he has not kept that commitment. We meet this morning to authorize the issuance of new bonds valued at over 1 billion dollars and the Opposition is sent the bare text of the motion at 5pm yesterday. A deliberate decision by this Prime Minister to withhold information from the Opposition members of this house. You see Mr. Speaker the Prime Minister is yet to learn that when he disrespects us on this side of the house he is disrespecting half the country of Belize and any leader even one as arrogant as he is who disrespects half the country and half the people in this country is doomed to absolute failure. The one thing every Belizean can be sure of today is that all the wining and moaning of the last 5 years about the super bond is over. No more crying Mr. Prime Minister. No more excuses."

Hon. Julius Espat
"What the Belizean people is concern about now that the restructuring is done, the blaming is over. The super bond boogeyman is done. The Belizean people want to know how is it that the United Democratic Party will grow this economy?"

Hon. Michael Finnegan
"They are of the impression or saying to the Belizean public that the super bond blame game is over. That is not true sir. The super bond blame game is not over. It will be concluded at 2038. How can they holler Mr. Speaker that the super bond blame game is over. Well I could tell you that if you all think that the super bond blame game is over you will hear it until you all are dead."

Hon. Oscar Requena
"I believe that it is a total disrespect when us as elected members cannot see the motion/papers that we are to come and debate in this honorable house and Mr. Speaker we owe it to the Belizean people and I also want to say that it is only fitting that these procedures be followed if you are going to be talking about strengthening our democracy in our country."

Prime Minister Dean Barrow
"Up to yesterday afternoon the terms were still being finalized with the lawyers in New York. They seem to think that we just snap our fingers and produce this agreement. If you don't understand there is nothing wrong with ignorance but don't try to turn your ignorance into a virtue. Simply say that there are gaps in your knowledge that you would like filled. This was an extremely high powered but delicate operation and that is the basis for the lack of more adequate from their point of view notice in terms of bringing the motion to the house today. I listen to the Leader of the Opposition saying that I disrespected half of the country. I don't agree but what is beyond doubt is that the People's United Party disrespected the entire country when it saddled us with the super bond. When you want to make noise about transparency and respect remember that none of those individual loans that were eventually lumped into the super bond - none of these huge onerous "shile up" light loans - none of them was brought to the National Assembly. You want to talk about transparency and lack of respect, in other words we did not know when you were contracting this international Bank of Miami, Mr. Speaker afterwards when we start hearing the names - names nobody in this country was even familiar with. I remember the song about the man who was complaining when the lady left him, he said the he bought he things that he couldn't even pronounced; Gucci. This super bond that we are now managing to tame, this super bond that we are restructuring consisted entirely of People's United Party government external commercial indebtedness."

"Where was the transparency when you contracted that UHS debt? When the ex-Prime Minister signed the guarantee that nobody knew about witness by the then attorney general the current Leader of the Opposition - where was the transparency then? Where was the respect?"

"Throughout I try to keep the nation apprise by way of the press conferences. We made clear that there were details that had not yet been finalized that we could not share. In general terms the people of this country have been following along this magnificent work in progress and they have no complaints to make about any lack of consultation. I will plead guilty to the fact that we did not specifically consult with the People's United Party. I will plead guilty, I will gladly plead guilty, I will proudly plead guilty to the fact that we did not kept them abreast because as the Honorable of Education has said if we had done so it would have meant that we would have been sharing critical details with quite frankly in terms of this process the enemy or at least the consort or the hand maiden of the enemy - that would have been a grotesque and I for one am not in that."

And to go over it in brief, some of the key features are: a 10% discount or haircut, maturing in 25 years time, which will bring it to the year 2038 rather than 2029 which was the maturity date for the original Superbond. For the first five years, the coupon rate is 5% and then it steps up to 6.78% for the remaining period.

Notably, the interest owed to bondholders up to September 2013 won't be paid, it will be capitalized?- a savings for Belize of 76 million dollars. Also on the upside for Belize: no consent fees are being paid to bondholders, and there are no value-added incentives given to bondholders:?such as oil certificates or GDP warrants. If those had been given, bondholders would have gotten a cut of future oil revenues, or a slice of the GDP if it grew beyond a certain level, as a compensation for their losses. But, no warrants means that they won't get any added portion of future growth in oil or GDP.

All told - as the PM pointed out, the net present value losses to bondholders are approximately 43.25% - which means the same amount in savings for Belize.

It's a good deal for Belize, but not yet not a done deal. It will be launched on Friday and to make it work, 75% of the bondholders would have to buy in - that's what triggers what's called a collective action clause - which then forces the holdouts to accept the new bond offering. We mention that caveat because according to the Prime Minister there are forces hard at work trying to undermine the bond offering. He explained...

Prime Minister Dean Barrow
"There was what a friend of mine refers to as the "the game behind the curtain" being played by the Ashcroft Alliance. Designed of course to wreck any agreement between Belize and Its bond holders. People in this country have seen the efforts mounted by the so-called Belize Debt Watch. They have seen the campaign of mis-information. Belize Debt Watch - the ads are prepared by Godfrey Smith a known agent of Michael Ashcroft voiced to some extent by Ashton Longsworth Belize Bond Group advocating directly to bond holders that no interest rate reduction should be given to Belize. Belize Bond Group - we have not been able to find out - they are operating anonomously - we Belize again that its part of the Ashcroft Alliance. The Ashcroft Alliance has denied it but certainly in terms Belize Debt Watch being handled local players that are just name - tied to the Opposition they endorsed this super super bond or debt slavery plan for Belizeans. Mr. Speaker if we were have to pay out immediately US$135.3 million dollars, if we were to saddled ourselves with a $1.033 billion dollars super super bond so that according to the Ashcroft Alliance we could pay their claims with respect to the nationalization in full I suspect that we would deserve a fate that would see the people of this country march every single one of us outside into the public square and hang us from the nearest tree."

7news has seen the email being circulated by the so-called "Belize Bond Group." It warns bondholders that government will give teachers and public officers a 10% pay raise for 2014 through 2017, quote "at the expense of bondholders'." It recommends? that all bondholders quote, "refrain from accepting this bond exchange." So with that kind of holdout campaign being pushed from some quarters, the three weeks ahead will be the true test - but Government sources say that if the bondholders don't accept this deal, they might not be seeing another any time soon.

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