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Belize could face over $100 million penalty for default if Superbond is not restructured

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Posted: Tuesday, March 16, 2021. 6:05 pm CST.

By Benjamin Flowers: Belize could be facing a penalty of over US$100 million if the government fails to successfully restructure the country’s U.S. Dollar Step-Up Bonds (Superbond), given the recent announcement by Prime Minister John Briceno that the country will not meet its US$13 million payment due in August.

During the 2017 -2018 restructuring exercise done by the former administration, Belize signed on to a number of clauses that were favorable to bondholders as a part of the concessions made for restructuring.

One of those clauses was a Principal Reinstatement Clause which says, “If the interest or principal falling due before the tenth anniversary of the issuance date is missed, and such default is not cured 30 days after the expiration of the grace period (the principal reinstatement date), Belize is obliged to issue within 5 business days on a pro-rata basis an amount of additional 2038 bonds equal to 11.11 percent of the outstanding principal amount.”

That 11.11 percent is estimated to be around $111,100,000 if the outstanding principal has not been lowered to below US$500 million. Notably, that isn’t the only default clause and we’ll have more on those clauses in a future article.

During his announcement of the impending default last week, Briceno said that the government has not begun formal negotiations but has been “sending signals” to the bondholders that renegotiations need to happen. Briceno said that chief among his administration’s concerns is to receive a haircut on the bond, as the current amounts being paid out are unsustainable.

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