— The government of Belize announced today that it will not make its Aug. 20, 2012, coupon payment on its U.S. dollar-denominated step-up bonds due 2029.
— We are lowering our long-term foreign currency sovereign credit rating on Belize to ‘CC’ from ‘CCC-‘.
— The outlook is negative, reflecting the prospect that we will lower our foreign currency ratings to ‘SD’ if the government misses its Aug. 20 payment as announced, or if it proposes a debt exchange to investors.
On Aug. 14, 2012, Standard & Poor’s Ratings Services lowered its long-term foreign currency sovereign credit rating on Belize to ‘CC’ from ‘CCC-‘. We also lowered our foreign currency issue rating on Belize’s US$546.8 million bond due in 2029 to ‘CC’ from ‘CCC-‘. At the same time, we affirmed our ‘C’ short-term foreign currency and ‘CCC+/C’ local currency sovereign credit ratings on Belize. Our ‘4’ recovery rating and ‘B-‘ transfer and convertibility assessment remain unchanged.
The rating action follows the government’s announcement today that it will not pay the $23 million semiannual coupon due on Aug. 20, 2012, on its $546.8 million bonds due 2029. The interest rate steps up to 8.5% on the accrued interest due this month. On March 19, 2012, the government of Belize initiated a review of its external public debt, and on Aug. 8, the government published indicative restructuring scenarios. Under our criteria, either a missed payment or an exchange that we view as distressed constitutes a default.
Belize, which has per capita GDP of approximately $4,500, had net general government debt of 68% of GDP at year-end 2011. We had projected the country’s 2012 gross external financing requirements at $210 million. We believe that Belize will fund this gap through the exceptional financing of default, import compression, and a drawdown of reserves, which the central bank reported at $282 million on a gross basis as of July 25, 2012.
The negative outlook reflects the prospect that we will lower our foreign currency ratings to ‘SD’ if the government misses its Aug. 20 payment as announced, or if it proposes a debt exchange to investors. The ratings could stabilize at this level if the government makes the payment and forgoes debt rescheduling negotiations.
Related Criteria And Research
— Short-Term/Long-Term Ratings Linkage Criteria For Corporate And Sovereign Issuers, May 15, 2012
— 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
— Assessing The Impact of Natural Disasters On Sovereign Credit Ratings, June 14, 2010
— Criteria For Determining Transfer And Convertibility Assessments, May 18, 2009
— Rating Implications Of Exchange Offers And Similar Restructurings, May 12, 2009
— Introduction Of Sovereign Recovery Ratings, June 14, 2007
— Belize Foreign Currency Ratings Revised To ‘SD’ After Announced Debt Exchange, Dec. 7, 2006
Downgraded; Ratings Affirmed
Sovereign Credit Rating
Foreign Currency CC/Negative/C CCC-/Negative/C
US$546.8 million bond due in 2029 CC CCC-
Recovery Rating 4 4
Belize Sovereign Credit Rating
Local Currency CCC+/Stable/C
Transfer & Convertibility Assessment B-
Senior Unsecured (Short-Term)
Local Currency C
Local Currency CCC+