Minister of Police in Belize comments on Belize Superbonds, the 2029 issue.
The BONDS closed Thursday March 1st in Berlin, Germany at .34 cents on the dollar. Don´t know what that return on interest would be, but probably around 25 to 25 % interest per annum.
Singh in an interview, if the UDP are re-elected will re-negotiate and re-structure the bonds.
That said, they are not allowed to borrow money on the international markets, say for 2% and buy them back. Part of the contractual arrangements on those bonds. That would have to change.
Another thing, is if the government got the interest rate down to 10% say, and were allowed to wipe out the extra bonds, to make the current bond values at 10%, for a lot less bonds outstanding would be more sustainable as well. In other words, if Government can be allowed to retire some bonds at face value, the balance remaining can be guaranteed a 10% return, rather than the 25% return they are currently having to pay on the total value of bonds outstanding. Or something like that?
There are choices and if the UDP are elected in a week from now, they intend to start the ball rolling on restructing this huge debt, they cannot sustain going forward. Bond Holders are going to take a hit one way or another.
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clarification c0mment attached to this piece
Beach Bum: as much as I enjoy your blog, you are simply wrong about the Superbond. You write:
"rather than the 25% return they are currently having to pay on the total value of bonds outstanding. "
This is simply wrong.
For the period 2012-2029 the Government of Belize is scheduled to pay 8.50% interest on the bonds outstanding. It is a fixed interest rate, not a variable one.
The current price of the bonds doesn't increase or decrease what the government has to pay. The interest rate is always 8.50% for the period 2012-2029 on the amount outstanding.
The maximum amount of money paid actually happens in 2019, as it is the full interest component plus the first scheduled amortization payment of 5% of outstanding bonds.
From then on, for ten years until 2029, the amortization component is fixed at 5% every six months, and as a result the 8.50% interest paid starts DROPPING at 5% every six months, as you only pay interest on outstanding debt.
The result is that for the period 2019 - 2029, every six months the GOB has to pay LESS than the previous six months due to the amortization of the bond.. This is a very important fact that many people ignore.
This is why the Superbond actually improved the debt profiling of Belize.
Before the Superbond, Belize also had external debt, but in the form of BULLET payments, which were due in TOTAL at maturity.
The Superbond allows the Government to pay the external debt in 20 payments, one every 6 months, over a period of ten years, 2019 - 2029. Instead of one lump sum payment at the end.
8.50% is not a high interest rate, regardless of the government's propaganda to misinform the people.
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Beach Bum: as much as I enjoy your blog, you are simply wrong about the Superbond. You write:
"rather than the 25% return they are currently having to pay on the total value of bonds outstanding. "
This is simply wrong.
For the period 2012-2029 the Government of Belize is scheduled to pay 8.50% interest on the bonds outstanding. It is a fixed interest rate, not a variable one.
The current price of the bonds doesn't increase or decrease what the government has to pay. The interest rate is always 8.50% for the period 2012-2029 on the amount outstanding.
The maximum amount of money paid actually happens in 2019, as it is the full interest component plus the first scheduled amortization payment of 5% of outstanding bonds.
From then on, for ten years until 2029, the amortization component is fixed at 5% every six months, and as a result the 8.50% interest paid starts DROPPING at 5% every six months, as you only pay interest on outstanding debt.
The result is that for the period 2019 - 2029, every six months the GOB has to pay LESS than the previous six months due to the amortization of the bond.. This is a very important fact that many people ignore.
This is why the Superbond actually improved the debt profiling of Belize.
Before the Superbond, Belize also had external debt, but in the form of BULLET payments, which were due in TOTAL at maturity.
The Superbond allows the Government to pay the external debt in 20 payments, one every 6 months, over a period of ten years, 2019 - 2029. Instead of one lump sum payment at the end.
8.50% is not a high interest rate, regardless of the government's propaganda to misinform the people.
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