Commonwealth Secretariat/ Carribean Debt Managers Assn. Debt (CARADEM)Forum 2013

1. Commonwealth Secretariat/Carribean Debt Managers Assn. Debt (CARADEM)Forum 2013 Restoring Debt Sustainability through Debt Restructuring Presented by: Zita Magaña Perez Ministry of Finance and Economic Development June 17-18 2013

2. Outline

3. Evolution of Total External Public Sector Debt (US$MN)

4. Debt Crisis • Significant increase in public debt stock during 2000-2005 • Use of Funds

5. Debt Crisis • By mid-2006 public debt burden was approximately US$1.1 billion, over 90% of estimated GDP

6. Debt Crisis • Composition of external commercial debt RBTT –Royal Bank of Trinidad and Tobago IBOM –International Bank of Miami

7. Debt Crisis • Repayment terms of external commercial debt • Interest payments absorbed 30% of fiscal revenues

8. Debt Crisis • Weakening foreign exchange reserve position and successive downgrades from the international credit rating agencies • It became increasingly expensive to access international funds to meet its debt obligations • To prevent a possible default of payments and a balance of payment crisis, GoB embarked on a comprehensive restructuring of its direct external commercial debt

9. 2006-2007 DEBT RESTRUCTURING

10. 1st Debt Restructuring • In August 2006, debt stock was of US$1.1 bn, 90% of which was external • Belize officially announced its intention to restructure its external commercial debt, US$565 mn • Belize’s strategy included : • Full and early engagement of creditors • Support of the IMF, IADB, and the CDB • Disseminating data and assumptions through the Central Bank of Belize Website

11. 1st Debt Restructuring (Cont’d) • On December 18 the Debt Exchange Offer was launched • Temporary suspension of debt service payments until the time of exchange closed

12. 1st Debt Restructuring (Cont’d) • Features of the new bond included:

13. 1st Debt Restructuring (Cont’d) • Debt Exchange Offer expired on January 26, 2007 and closed on February 20, 2007 • Various instruments were substituted for a single one, US Dollar Bond due 2029 “Superbond” • 98.1% of the affected debt was restructured, (currently 99%) • Highest recorded sovereign debt exchange • Use of Collective Action Clause (CAC)

14. 1st Debt Restructuring (Cont’d) • The new debt service profile provided cash flow relief over an extended period of time

15. 1st Debt Restructuring (Cont’d) • The overall debt dynamics improved

16. Post 2006-2007 Restructuring The restructuring provided short-term debt relief Belize’s medium and long-term macroeconomic outlook remained a source of concern GoB’s concerns included: Level of public debt remained high Projected Decline in oil revenue Exacerbated by the global financial crisis Nationalization of public utilities

17. Post 2006-2007 Restructuring Key Indicators for the period 2007 - 2011

18. Post 2006-2007 Restructuring Belize faced a negative external climate and a heavy strain on public finances With projected financing gaps from 2013 onwards GoB was determined to put public debt on a sustainable path

19. 2012-2013 DEBT RESTRUCTURING

20. 2nd Debt Restructuring On March 16, 2012 a debt restructuring team was appointed On June 20, 2o12 GoB formally announced its intention to restructure its US 2029 Bond On August 8 GoB published 3 indicative restructuring scenarios on the Central Bank of Belize website

21. 2nd Debt Restructuring

22. 2nd Debt Restructuring On August 14 GoB announced it was unable to meet its second annual payment of US$ 23.2mn due August 20, 2012 On September 20, 2012 a partial payment of US$11.6mn was made On October 2 GoB began debt negotiations with a Creditors Coordinating Committee

23. 2nd Debt Restructuring In November the Coordinating Committee presented preferred restructuring proposals to GoB On November 21 GoB rejected proposals as they only provided short-term relief GoB then published its second set of indicative scenarios

24. 2nd Debt Restructuring GoB then publishes second set of indicative scenarios on November 21, 2012

25. 2nd Debt Restructuring In December negotiations result in agreement on Net Present Value for the restructuring On February 12, 2013 GoB sought the approval of the Parliament for the financial terms of an Offer to Exchange its US Dollar Step-Up Bonds due 2029 GoB received that approval on the same day

26. 2nd Debt Restructuring On February 13, 2013 GoB launched its Debt Exchange Offer to exchange US$547,522,200 with the following agreed terms:

27. 2nd Debt Restructuring On March 8 GoB announced the success of the Debt Exchange Offer with 86% participation Use of Collective Action Clause On March 20 Belize closed the Exchange of its US Dollar Bonds due 2029 for a new US Dollar Bond due 2038

28. 2nd Debt Restructuring

29. 2nd Debt Restructuring The below table shows the coupon payments made under the first and second bond restructure

30. 2nd Debt Restructuring Under the new US 2038 Bond, debt relief will be:

31. 2nd Debt Restructuring When discounted on a net present value basis , the new bonds represent a reduction of more than 43% as compared to the current terms

32. Reform of Public Debt Management • GoB has committed to the following initiatives with a view to improve the management of its public debt • Formulate Medium Term Debt Management Strategy • Establish a Debt Management Committee • Enact a new Public Debt Management Act • Enact New Securities and Capital Market Act • Modernize the process for Securities Trading • Adopt other improvements for the management of Public Sector Debt

33. References • Central Bank of Belize www.centralbank.og.bz • Houlihan Lokey Investment Banking Services Belize’s Debt Restructuring Process, February 2007 • Ministry of Finance www.mof.gov.bz

34. Thank You