Belize makes offer to buy back portions of “Superbond” by November in ‘debt-for-nature’ arrangement

By Aaron Humes: A potential breakthrough has been reached in respect of buying back portions of Belize’s U.S. Dollar Bonds due 2034 (the “Bonds” or “the Superbond”) by means of a forthcoming cash tender offer (the “Offer”) and consent solicitation, through which Belize will seek to purchase, redeem and cancel all of the outstanding Bonds.

A Government statement says the agreement was reached with the Committee of Institutional Investors led by Aberdeen Standard Investments, Grantham, Mayo, Van Otterloo & Co. LLC and Greylock Capital Management, LLC. The investors that have appointed the Committee hold close to 50% of the outstanding principal amount of the more than $1.1 billion owed.

Those who tender their bonds prior to the date of expiration (November 19, 2021) will be paid 55 per centum of the principal as of September 1 – 51.7 percent purchase price and .33 percent accrued interest payment. If less than three-quarters of eligible holders do not tender before then, they receive the 51 percent purchase price and no interest payment. Bondholders will also be paid .01 percent of the principal as a contingency and their expenses. Belize also commits to prefund to the tune of $23.4 million at settlement, a Marine Conservation Endowment Account. This endowment account, which will be administered by an affiliate of The Nature Conservancy (“TNC”), will be devoted to supporting future marine conservation projects in Belize.

The Government says it expects to finance the purchase of the Bonds with funding provided by TNC in connection with their Blue Bonds for Ocean Conservation program (the “Blue Bonds Financing”), which uses private capital to refinance public debt of participating countries in order to support durable marine conservation efforts and sustainable marine-based economic activity. Belize’s offer to repurchase the Bonds for cash will be conditional on the consummation of the Blue Bond Financing.

As part of the Blue Bonds Financing, Belize would accelerate its marine conservation commitments, including enhanced protections for its coastline, reef and ocean territory as well as the funding of an endowment to support future marine conservation projects in Belize

“If the Offer is consummated, Belize will retire all its outstanding Bonds through the Offer and the Redemption (facilitated by the use of the collective action clause provision contained in the trust indenture). The resulting cash flow savings will materially assist in the alleviation of the devastating consequences of the COVID-19 pandemic as well as help to achieve important environmental conservation goals. Further, the consummation of the Offer, together with Belize’s Homegrown Economic program and fiscal consolidation, will pave the way for strong and long-lasting economic growth and the furtherance of critical marine conservation objectives,” the Government concludes.

Separately, the bondholders assert their satisfaction with the agreement, writing, “As members of the Committee, Aberdeen Standard Investments, Grantham, Mayo, van Otterloo & Co. LLC and Greylock Capital Management, LLC welcome the environmental and marine conservation features of the proposed transaction with The Nature Conservancy (“TNC”), which is in line with their support for, and continuous development of, innovative ESG financing techniques. The Committee Members and their advisor engaged closely with key local and international stakeholders while collaborating with the process that has made this transaction achievable, and are optimistic that future international sovereign debt operations will incorporate measures that aim to enhance environmental sustainability and resilience.”

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