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TEXT-S&P cuts Belize rating to selective default
August 21, 2012 / 6:57 PM / 5 years ago

TEXT-S&P cuts Belize rating to selective default

Overview
     -- On Aug. 20, the government of Belize missed a coupon payment on its 
US$547 million bond due in 2029.
     -- The government had previously announced that it would not pay the $23 
million interest payment due on Aug. 20. 
     -- We consider the failure to pay the accrued interest a default under 
our criteria.
     -- We are lowering our foreign currency ratings on Belize to 'SD' and our 
rating on Belize's 2029 bond to 'D'.

Rating Action
On Aug. 21, 2012, Standard & Poor's Ratings Services lowered its long- and 
short-term foreign currency sovereign credit ratings on Belize to 'SD' 
(selective default) from 'CC/C'. At the same time, we lowered our rating on 
Belize's bond due in 2029 to 'D'. Our ratings on the government's local 
currency debt remain at 'CCC+/C'. Our recovery rating on Belize's foreign 
currency debt is '4', indicating an estimated postdefault recovery of 30%-50%.

Rationale
The rating action follows the government of Belize's failure to pay the US$23 
million semiannual interest coupon due on Aug. 20, 2012, on its US$547 million 
bond due in 2029. The bond, which has a step-up interest rate, began accruing 
interest at 8.5% annually in February 2012. 

Belize, which currently is in debt rescheduling discussions with the creditors 
of the 2029 bond, initiated a review of its external public debt on March 19, 
and on Aug. 8, the government published potential rescheduling scenarios for a 
distressed debt exchange. Last week, the government announced it would not pay 
the US$23 million (an estimated 6% of government revenues and 1% of GDP) 
interest payment due on Aug. 20. 

The government is in the early stage of rescheduling negotiations. As the 
terms become clearer, we will publish our expectations for a postdefault 
foreign currency rating.

The long-term local currency rating remains at 'CCC+', with a stable outlook, 
because we do not expect the default to affect local currency obligations, as 
was the case in the last distressed exchange in 2007. If the rescheduling 
negotiations become protracted and have a more severe impact on the economy 
than currently expected, that could put pressure on the local currency rating.

According to Standard & Poor's ratings definitions, an obligor rated 'SD' or 
'D' is in payment default on one or more of its financial obligations (rated 
or unrated) unless Standard & Poor's believes that such payments will be made 
within five business days, irrespective of any grace period.

Related Criteria And Research
     -- Belize Long-Term Foreign-Currency Rating Lowered Two Notches To 
'CCC-'; Outlook Negative, March 1, 2012
     -- Belize Long-Term Ratings Lowered One Notch To 'CCC+'; Outlook Stable, 
Feb. 6, 2012 
     -- Belize, Dec. 28, 2011 
     -- Sovereign Government Rating Methodology And Assumptions, June 30, 2011 
     -- Timeliness of Payments: Grace Periods, Guarantees, And Use Of 'D' And 
'SD' Ratings, Dec. 23, 2010
     -- Rating Implications Of Exchange Offers And Similar Restructurings, May 
12, 2009 
     -- Introduction Of Sovereign Recovery Ratings, June 14, 2007

Ratings List

Downgraded
                                        To                 From
Belize
 Sovereign Credit Rating
  Foreign Currency                      SD/SD              CC/Negative/C
 Senior Unsecured
  US$547 mil. bond due 2029             D                  CC 
   Recovery Rating                      4                  4

Ratings Affirmed

Belize
 Sovereign Credit Rating
  Local Currency                        CCC+/Stable/C      
 Transfer & Convertibility Assessment   B-                 
 Senior Unsecured (Short-Term)          C                  
 Senior Unsecured (Long-Term)           CCC+

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