Sunday, August 19, 2012

BELIZE HAS DEFAULTED ON IT'S FOREIGN OWNED SUPERBONDS

BELIZE HAS DEFAULTED ON IT'S " BELIZE SUPER BONDS"

  This Sunday marks the end of the period when interest should be paid on the Belize Superbonds.  The PRIME MINISTER/FINANCIAL MINISTER ANNOUNCED THIS WEEK, THAT BELIZE WOULD DEFAULT, AS BOND HOLDERS WOULD NOT NEGOTIATE REALISTICALLY, GIVEN THE CONDITION OF THE FINANCES OF THE SMALL COUNTRY. Pop: 330,000.

  There is some wiggle room, as there is a further 30 days, foreign bond holders can still negotiate a deal.  Some Belizeans have already bought the Belize Super bond.  It has been trading in Lichenstein, Munich and Berlin that I now of, on the emerging markets exchanges, on a bank to bank basis.  Lord Ashcroft is holder of some millions of the Belize Superbond, through his Belize Bank, a native bank in Belize, it is said. Lord Ashcroft also has dual citizenship.

  I have been trying to buy $25,000 worth from my bank, ATLANTIC BANK, but after a long discussion, they said they were a local bank and did not have the ASSOCIATE BANKS necessary in foreign parts, to act as my broker.  I had bid .05 cents on the dollar and offered a 2% commission as a broker. Same as a bank in Geneva, Switzerland.  Unfortunately using a SWISS bank, would be a foreign buyer and you could lose all your edge in the gamble, depending on what the Prime Minister does. You really need a local bank.

  Lord Ashcroft should come out alright. I believe he bought some between .60 and .70 cents on the dollar and will undoubtedly buy much more at lower panic prices.

  The gamble is;  that the Prime Minister/Finance Minister will protect Belizean owners of the Superbonds like ICELAND DID.  ICELAND made EU banks eat their losses on their mortgage default swap debacle.  But continued honoring local ICELAND BANKS and investors after renegotiating.  All external commercial owners and investors will have to eat their investment now in Belize also.  Usually EMERGING MARKET bonds like ours in Belize, are less than 1% of anybody's portfolio and they already received back in interest more than half of their investment anyway.  So losses are not to be too bad for external commercial owners.  Emerging market bonds are always a gamble, of high risk.On the other hand the ability to buy the Belize Superbond through a local bank in Belize by Belizeans, is severely limited.  Mostly such emerging market bonds are traded BANK TO BANK.  Local Bondholders are expected to get preferential treatment after the default.  At JAGUAR CAPITAL MANAGEMENT in Hillview, we have not been able to buy HIGH RISK SUPERBONDS yet, but still trying.

  The Prime Minister has been talking of knocking off 50% of the value of the bond and offering a longer repayment period at 1% above USA bank savings rates, currently in the USA

  If a Belizean can buy such SUPERBONDS.  IF you can get it under .05 cents on the dollar, then it is a good buy.  With preferential treatment from the government for local citizens.  Even if Prime Minister Barrow, drops the interest rate to 2% or so.  That would be a 20% return on your coupon each year.  Let us say, the re-negotiating takes the expected, haircut of 50% in original face value of the bond.  At 5 cents on the dollar, that would at 2% interest rate, still get you 10% return on the BOND coupon.

  The GAMBLE of course; would Prime Minister Dean Barrow follow the course of ICELAND?  Belize Bonds during the 30 day follow up period should even trade below 5 cents, as foreign bank owners of Belize Bonds, try to reclaim something from the lost gamble. At JAGUAR CAPITAL MANAGEMENT in Belize, we wait and see developments.

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