Belize Government Bonds Tumble Amid Debt Default Fears

by Leroy Baker, Tax-News.com, New York

14 August 2006

The prices of Belize's international bonds have tumbled in recent days after it emerged that the government was struggling to keep up repayments on its foreign currency debt, prompting fears from investors of a default.

According to Bloomberg News, the bonds traded at a price of 72 cents on the dollar last Wednesday, down from 92 cents in February 2006. Meanwhile, bond yields on the 9.75% coupon bond due in 2015 have been pushed up to 15.71%.

The government of Belize spends 27% of its revenues on interest payments alone and total debt stands at more than 90% of the country's gross domestic product.

Earlier this month, Prime Minister Said Musa revealed that the government is seeking the cooperation of the country’s private sector creditors in a rearrangement of Belize’s $960 million external debt stock.

“Servicing of the Belizean external public sector debt stock on its existing terms is no longer a viable option,” explained Musa, who is also the country's minister of finance.

“We must urgently ask the cooperation of our creditors to help put this debt stock on a sustainable financial footing," he added.

To make matters worse for Musa, ratings agency Standard & Poor's has lowered its long-term foreign currency sovereign credit rating on Belize to 'CC' from 'CCC-' on the back of the government's announcement. This is just two notches above a 'D' rating - the lowest possible.

S&P also left its outlook on the rating at negative.

S&P affirmed its 'CCC+' long-term local currency sovereign credit rating on Belize but revised its outlook on the rating to stable from negative. Much of Belize's local-currency-denominated debt is held by public sector institutions.

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