UPDATE 1-Belize debt amendment deal with creditors prompts ratings downgrade

Australian dollars in Sydney, Friday, Jan. 15, 2016. (AAP Image/Joel Carrett) NO ARCHIVING

(Adds comment from creditors’ legal counsel)

By Rodrigo Campos

NEW YORK, Aug 12 (Reuters) – A deal between Belize and its creditors to amend the terms of bonds due in 2034 triggered a downgrade on Wednesday of the Central American country’s sovereign debt rating.

The government said on Monday that holders of 82% of the outstanding bonds voted in favor of the amendment, more than the required 75% under collective action clauses (CAC).

The amendment defers and capitalizes quarterly interest payments due from Aug. 20 through Feb. 20 of next year, without affecting the bonds’ final maturity.

Having reached the CAC thresholds, all holders are bound to the amendments.

Belize, which is heavily dependent on tourism, launched the proposal last month. It told its creditors it could not afford the next three interest payments, partly due to the economic hit from the COVID-19 pandemic.

“This is a case of bondholders being constructive when faced with a situation where they recognize a country has some short-term liquidity constraints due to the coronavirus pandemic,” said Thomas Laryea at Orrick, Herrington & Sutcliffe, legal counsel to the bondholders’ steering committee.

Standard & Poor’s cut Belize’s foreign currency rating to “selective default” on Wednesday, and lowered the rating on Belize’s 2034 bond to ‘D’.

“We will consider raising the ratings once the new terms and conditions of the 2034 bonds come into effect,” S&P said in a statement.

The 2034 bond had over $526.5 million outstanding, according to Refinitiv data. (Reporting by Rodrigo Campos, additional reporting by Marc Jones in London; Editing by Rosalba O’Brien and Tom Brown)

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