Superbond renegotiations prompts S&P downgrade

Posted: Tuesday, March 21, 2017. 4:44 p.m. CST.

Hon. Dean Barrow
(Prime Minister of Belize)

By BBN Staff: Standards and Poor’s Global ratings, in light of Belize’s restructuring of the 2034 US dollar Bonds, made changes to Belize’s credit rating, including downgrading Belize’s long-term currency rating from CC to SD.

S&P explained that it downgraded the raring from CC (Eminent default with possibility to recover) to SD (Selective Default) as part of its standard procedure when obligators make a distressed exchange offer (restructuring of an agreement).

“As per our criteria, we characterize this exchange offer as distressed as it is our view that holders of the U.S dollar bonds have accepted less than the originally promised payments because of the risk that the issuer won’t fulfill its original obligations with respect to such bonds,” S&P said.

The agency also lowered Belize’s short-term foreign currency rating from C (currently highly vulnerable to nonpayment) to D (in default or in breach of an imputed promise). 

The agency added that Belize is less likely to default on local currency-denominated debt, because the Government had made no mention to restructure any such debt. S&P estimated that after the restructuring takes effect, Belize’s ratings will go back up to either CCC (vulnerable to nonpayment) or low tier B (more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation).