The Belizean government has announced that 93% of its bondholders have taken up the US$500m debt swap it offered in December to replace existing commercial foreign debt new instruments maturing in 2029.
Principal repayments on the new bonds will start in 2019. The bonds will bear interest in the first three years after issuance at a fixed per annum rate of 4.25%. In years four to five, the rate will step up to 6.00%, and thereafter through the maturity of the bonds the interest rate will level off at 8.50% per annum.
The exchange offer was preceded by four months of intensive consultations with the affected creditors by the Belizean authorities.
"On its existing terms," explained Belizean Prime Minister Said Musa in December, "Belize's stock of external commercial debt is visibly unsustainable. Through this transaction, Belize will have consolidated the debt into a single new series of bonds, improved liquidity for the creditors, stretched out maturities and significantly lowered the average rate of interest on the debt. Over the next five years, this transaction will save an estimated $301 million in debt service costs for Belize in comparison with existing terms."
The launch of the transaction was approved by the National Assembly of Belize in mid-December. Mark Espat, Minister of National Development of Belize, added: "This operation has been carried out with a strict adherence to the principle of transparency and respect for intercreditor equity. We have worked in a cooperative manner with our creditors and we look forward to their strong support for the transaction."
Tenders by the creditors were due by January 26, 2007, and the transaction is expected to close during the third week of February.
Prior to the swap, Belize bonds were trading at 72 cents on the dollar, and bond yields on the 9.75% coupon bond due in 2015 had reached nearly 16%. Standard & Poor's had lowered Belize's sovereign credit rating from CCC- to CC.
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