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Moody’s cuts Belize credit rating for second time in six months

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Posted: Wednesday, November 25, 2020. 11:14 am CST.

By Aaron Humes: Anticipating that Belize will once again ask for relief from the Superbond to offset rising debt, Moody’s Investors Service on Tuesday cut the sovereign foreign currency credit rating to CAA3 from CAA1, the second such downgrade in six months, according to Latin Finance.

Its outlook on credit was revised from negative to stable.

In a statement, Moody’s said it expects debt ratio to GDP to reach more than 130 percent by year’s end. New Prime Minister John Briceño estimated last week in a national address that it was already at 132.9 percent after months of borrowing to meet recurrent expenditure such as salaries.

Former Prime Minister Dean Barrow had signalled that there would certainly be a need to again resructure the Superbond as part of a wider debt relief program for countries such as Belize.

After deferring interest payments worth US $27 million between August 2020 and May 2021 on the 2034 Superbond, Belize’s financial position remains so strained that further relief will be sought that leads to renewed losses for investors, the firm stated, expecting that Belize will either outright miss payments or exchange distressed debt because the tourism-dependent economy has not fully recovered from containment of travel due to the COVID-19 pandemic.

The liquidity relief achieved with deferment avoided a broader restructuring of the bond, but did not address these solvency concerns, Moody’s continued; financial pressures will not abate in time for the next interest payment due in 2021.

The last major restructuring of the Superbond took place in late 2016 and early 2017, slightly decreasing interest rates from to 4.9375% from 5% and reducing principal payments to five bullets due between 2030 and 2034, with interest paid twice yearly before that.

Belize’s 2034 bond was quoted with a bid price of 49.75 on Tuesday, up 6.125 points to yield 13.951%, according to data provider Refinitiv.

Belize’s economy is set to contract by as much as 14 percent this year and then rebound by as much as 8 percent in 2021.

 

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