Belize Wins First Step Toward an Ocean-Friendly Restructuring

(Bloomberg) — Belize struck an agreement in principle with a group of bondholders to buy back its debt at a discount — but with an unusual, ocean-friendly twist.

Under the accord announced Friday, the Caribbean nation would purchase, redeem and cancel all of its outstanding dollar bonds, the nation’s Ministry of Finance and bondholder group said in statements. Belize has about $530 million of its so-called superbond outstanding, according to data compiled by Bloomberg.

What is unusual is the financing. The government plans to use money provided by the Nature Conservancy’s blue bond financing program, which will use private capital to help refinance nations’ public debt. As part of that program, Belize would enact “durable marine conservation efforts and sustainable marine-based economic activity,” according the government statement.

Belize will also fund a $23.4 million endowment to support future marine conservation projects.

According to the preliminary pact, creditors who tender their bonds before the deadline will receive a cash amount equal to $550 per $1,000 of the outstanding principal of the bonds as of Sept. 1. The 2034 bonds were little changed on Friday at 39.9 cents on the U.S. dollar.

Key Deal

It’s a key deal for the serial defaulter, which was downgraded by S&P Global Ratings in May amid doubt the nation would be able to make an interest payment on its superbond due in 2034.

The extra yield investors demand to hold the nation’s sovereign bonds over U.S. Treasuries was 1,630 basis points on Friday, according to JPMorgan Chase & Co. data, well above the threshold for debt to be considered in distress.

Belize has a long history of international debt troubles, defaulting on, changing terms on or restructuring its dollar bonds at least five times in the past 14 years. The coronavirus and brutal hurricane seasons have made matters worse for the tourism-dependent nation, derailing what had been a nascent economic recovery.

Earlier this year, the government said it was looking to engage bondholders in restructuring negotiations and won approval to push out interest payments, a delay which was recently extended until Sept. 19.

Last year, officials got investor consent to capitalize interest payments on the superbond.

Blue Plan

The agreement in principle on Friday was reached with a key creditor committee comprised of Aberdeen Standard Investments, Grantham, Mayo, Van Otterloo & Co. and Greylock Capital Management. The group holds about 50% of the outstanding principal amount of the notes.

In order for the deal to go through, Belize will need to win consent from holders of 75% of the outstanding principal. The blue-bond financing will also need to be finalized for the deal to proceed.

The preliminary agreement comes in advance of a formal cash tender offer and consent solicitation. If Belize’s offer is fully approved, the amendments will go into effect on the settlement date of Nov. 19, according to the government’s statement.

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