August 22, 2012 / 12:51 AM / 7 years ago

UPDATE 2-Ratings agencies see steep losses on Belize superbond

* Ratings agencies warn of bondholder losses

* Belize says still hopes to resolve by year-end

NEW YORK/MEXICO CITY, Aug 21 (Reuters) - Ratings agencies said on Tuesday holders of Belize’s so-called superbonds would likely face severe losses on their investments after the country missed an interest payment this week and has made little headway on talks about debt restructuring options.

Belize said it hoped to reach a deal with bondholders by the end of the year but could not afford to service the loan after a step-up in the interest rate to 8.5 percent pushed a regular interest payment scheduled for Aug. 20 up to $23.5 million.

In response to the missed payment, Standard & Poor’s cut Belize’s foreign currency sovereign credit ratings to selective default and estimated bondholders would recover 30 to 50 percent of principal on the bonds.

Moody’s changed the outlook on Belize’s ratings to negative and said investors would probably have to absorb losses of 70 to 80 percent in net present value terms.

Belize has a final deadline of Sept. 19 to pay the coupon but a senior finance ministry official said it was unclear whether the Central American country would pay or default.

Creditors were shocked by restructuring options put forward by Belize earlier this month, involving a haircut of up to 45 percent on the $550 million bond.  But in a statement posted on the Belize central bank’s website, the government said the options were not final and it looked forward to feedback from a committee set up to represent creditors. (Central bank statement:)

“We remain eager to have a constructive and sober dialogue with creditors,” it said in the document.

“A constructive dialogue at this juncture cannot move forward until the committee provides its views. As to timing, the government would like this to be a 2012 operation, but obviously this requires the good faith cooperation of the bondholders.”

In the statement, the government said it was “currently disinclined” to go ahead with any option that did not have support from at least 75 percent of creditors.

Carl Ross, managing director of investments at Oppenheimer, told Thomson Reuters’ IFR there was a range of options for the coupon payment.

“At one end of the range would be outright repudiation of the debt, and the other end would be for Belize to say, ‘Oh, we were just joking,’ and pay the interest in the grace period,” he said. “I think the reality is going to be somewhere in between, using the coupon as a sweetener.”

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