The 2029 bond represents approximately 50% of Brazil’s total public debt, and the government says the payment, due Aug. 20, is too high.
“We simply cannot afford this coupon payment given the financing shortfalls and other challenges we face,” said Dean Barrow, prime minister and finance minister of Belize. “Our hope, however, is that we can move quickly toward a sensible restructuring of the instrument.”
If the government fails to pay the bondholders within 30 days of Aug. 20 it will default on its debt. However, the government is expected to renegotiate the structuring of bonds in the future.
“I guess the Belize government wanted to start from a position of strength,” said Boris Segura, analyst with Nomura Securities. “It’s going to be a tough negotiation.”
Bondholders and the Belize government have been negotiating since the country said it found its monthly dues too high. Last week, the Central Bank of Belize proposed a restructuring of the bond that would discount its value and reduce its coupon rate, according to a note on the bank’s website.
Ultimately the government is supposed to come up with a deal that 75% of bondholders agree to before they can proceed with the restructuring.
But the government has the money to pay the coupon, and instead has decided not to pay it, analysts say.
Prior to saying it wouldn’t make the payment, the government had insisted it wanted to process to be orderly and market friendly.
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“Belize Unable to Make Bond Payment, Says Prime Minister,” at 12:43 p.m. EDT, should have referred to Belize’s total public debt, not Brazil’s, in the second paragraph.