Belize 2034 bond sinks following questions over finance capacity

Belize 2034 bond sinks following questions over finance capacity

Bonds Debt Capital Markets Economy & Policy Funds Fixed Income Belize Central America Coronavirus

The price on Belize's 2034 sovereign bond fell precipitously on Wednesday, a day after Moody's Investors Service downgraded the government's sovereign credit rating, questioning its ability to make interest payments on the debt given its tourism sector has suffered from the coronavirus pandemic.

The 4.9375% February 2034 bond fell 11 points in price to bid 40, pushing the yield up to 16.88%, according to data provider Refinitiv. As recently as late February, the yield had been as low as 10.15% before steadily climbing as the pandemic deepened in the region. The current yield has not been this high since the bond was restructured three years ago. 

On Tuesday, Moody's said it cut the rating to Caa1 from B3 citing an "increased and now very high probability" that it will either defer on interest payments or enter into a distressed debt exchange because of the economic stresses imposed by the coronavirus pandemic.

One investor familiar with Belize's debt position, who requested anonymity, said it was unclear if the government made any official moves to start a process for discussing the interest payment due in August on the bond. The 2034 issue has roughly $526.5 million outstanding, according to Refinitiv.

A government spokesman was not able to make a comment immediately when contacted after business hours on Wednesday.

In March 2017, Belize said 87% of the holders of its then 2038 superbonds consented to a restructuring of its bond. At the time, the new terms spelled out that the interest rated accrued will be set to 4.9375% from 5%. The notes will also no longer increase to 6.7%, as was planned for August of that year. The maturity was modified to 2034 from 2038.