Bloomberg News

Belize’s Looming Debt Restructuring Prompts Cut by Moody’s

June 01, 2012

Belize’s debt rating was cut for the second time this year by Moody’s Investors Service, citing a probable restructuring of the government’s $547 million bond and “weak economic growth” in the Central American nation.

Moody’s lowered Belize’s foreign-currency debt rating to Ca, or 10 levels below investment grade, from Caa1, the company said in an e-mailed report today. Prime Minister Dean Barrow, who won a second five-year term in March, has vowed to restructure the so-called superbond. The security was approved in 2007 to help consolidate the country’s debt, which totals about $1 billion, more than 70 percent of the nation’s $1.4 billion economy, according to the central bank.

“The economic outlook is tough,” said Boris Segura, a Latin America analyst at Nomura Holdings Inc. in New York. “Public-sector debt as it is is unsustainable.”

Barrow’s comments led Moody’s and Standard & Poor’s to lower the country’s credit rating in February. Barrow said at the time that he didn’t “give a damn about the rating agencies” and that the superbond restructuring was needed for the “development of Belize, for the people of this country.”

Yields on Belize’s dollar bonds due in 2029, part of the superbond, were little changed at 19.10 percent. The yields have risen almost 300 basis points, or 3 percentage points, this year.

Yield Spread

The extra yield investors demand to hold Belize’s government dollar bonds instead of U.S. Treasuries increased 10 basis points to 1,704, the highest among countries tracked by JPMorgan Chase & Co.’s EMBI Global index including Argentina, Venezuela and Pakistan.

“Fiscal space remains limited and public debt is set to report an unsustainable trajectory in coming years as a result of rising debt service costs and limited growth prospects,” Moody’s said in its report today.

It’s not clear how much of a reduction in their investment bond holders should expect in another debt negotiation, according to Segura.

“That’s the big question,” Segura said. “Will it be a friendly or unfriendly restructuring?”

To contact the reporter on this story: Adam Williams in San Jose, Costa Rica at awilliams111@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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