Belize plans to launch debt exchange this month, stops debt payments on existing debt

New York, Dec. 6 - The Government of Belize said it plans to exchange most of its outstanding external commercial debt for new bonds denominated in U.S. dollars and added that it has stopped payments on the existing debt.

Subject to approval by the country's national assembly, the exchange will be launched later in December.

Terms of the exchange have been fixed following consultations with creditors.

"A consensus seemed to form around the maturity date of the new bond (22 years), as well as on the desirability of preserving principal at the aggregate level," said Mark Espat, Belize's minister of national development, in a news release.

"The most debated issue was the proper coupon structure of the new bonds. Some creditors proposed a total debt service holiday in the early years, followed by an immediate jump back to very high fixed coupons. Others advised a more gradual, step-up coupon structure, consistent with Belize's projected capacity to pay."

Espat said Belize concluded that it can afford some coupon payments, even in the early years, and believed it would be "unfair" to creditors to ask for a complete debt service holiday.

As a result the country has settled on a step up.

But, Espat added: "The level of these coupons, however, has been set well above Belize's indicative restructuring scenarios. They are, in effect, at the outer edge of what forecasts show as being affordable for the country."

The new bonds will mature in 2029, with principal payments starting in 2019.

Interest will be at 4.25% for the first three years, stepping up to 6% in years four and five and 8.5% after that.

Creditors will also receive accrued interest through the closing date in cash when the exchange settles.

Interim debt service payments on the existing debts eligible for this exchange offer will cease immediately.

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