In The Aftermath Of The Greek Blue Light Precedent: Belize Demands Half Off On Its Debt... Or Else

Tyler Durden's picture

"Greece set a precedent for 'Here's what you're going to get, take it or leave it'" is how the WSJ summarizes an analyst's 'shocked' thoughts on the growing game of 'call my bluff' being played among beggars being choosers. Belize, a Central American nation with an economy the size of Pine Bluff, Arkansas, is surprise surprise running out of money to pay its debts and is insisting that creditors forgive 45% of what they are owed - OR allow it to delay any debt payments for 15 years (yes, seriously, read that again) - leaving a default on the country's $543.8mm almost inevitable.

Three things stand out to us: 1) the nation's government simply posted a note on its website that it would be 'skipping a payment' as opposed to telling creditors directly; 2) none other than 'Long GGBs are the slam-dunk trade-of-the-year' Greylock Capital are "mystified" that yet another trade has gone pear-shaped adding that they are "sure every country could benefit from not paying their debt but this isn't the way to do it!"; and 3) this would be one of the worst restructuring terms ever as the "Greek effect" could inspire other countries to pursue restructurings on more favorable terms - especially given that: "Even if you don't need a restructuring you can force one upon bondholders because it's so hard to recover money from a sovereign who won't pay,"


With the Belize 2029s trading at $37.375 (against a $55 'offer' of restructuring from the government), the market is obviously saying that a restructuring event will occur and be somewhat rapidly followed by a REdefault...


From the WSJ:



Prime Minister Dean Barrow in a March television interview said the global 2029 bonds, issued by a different administration, had come at too high a price.


The bond's interest rate rises over the course of its life, reaching 8.5% for the August payment, from 4.25% in 2007, when several loans were consolidated into a single bond.


...[preventing] the current government from using "our recurring revenue to do more for the people, to push employment and to push job creation,"


... triggered a sharp selloff in Belize's bonds, driving yields higher. The yield peaked at 30.2% after the restructuring proposal earlier this month, from 16% at the start of the year. The bond yielded 26.3% on Friday.


Roberto Sanchez-Dahl, an emerging-market portfolio manager with Federated Investors, said...


"We thought that the probability of the government being bond friendly was going to be low, given [Barrow's] rhetoric of pushing against foreign holders [that] resonated very well domestically," Mr. Sanchez-Dahl said. "They would definitely not give priority to foreign investors, or put them in front of domestic needs."

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Neethgie's picture

Funny thing is, belize got all its money from tory boss, lord ashcroft, in the uk.... damn guess hes broke now? only got 1 billion left.

DoChenRollingBearing's picture

It's a GOOD thing that Reshma Kapadia ("Emerging Markets" writer at Barron's) did not suggest buying banks in BELIZE!

"Review of Barron's -- Dated 20 August"

economics9698's picture

Oh fuck another country Bernanke will print for.  Bend over.

Precious's picture

The Greek parliament is facing a difficult fiscal decision: Twitter or butter.

Harlequin001's picture

So, WTF happened to the 'risk free' rate?

flacon's picture

It's time to sell your silver, your moms silver, your brothers silver, and get into rock solid high denomination zimbabwe (or Belize) bank notes! /s

redpill's picture

As soon as more countries start to figure out that instead of adding to their already unpayably large debt that they are better off by just defaulting on the debt they already have, then things will really start to get fun.

Harlequin001's picture

Me, I'm just one of them dum bad ass 'speculators' that's selling gold at the moment to buy... er, silver, for the bounce that is.

When silver tops $75 I'll sell it and buy back into gold for the lesser volatility.

and then when I'm really rich I'm going to pile it all into a basket of European and US T bills for that elusive 'risk free' diversified return.

Hang on, do I detect a flaw in there somewhere?

Of course I do, if I had any sense at all I should just pile it all into US T's, just for safety, you know...

economics9698's picture

Condos around Disney, Orlando, are going for 25 cents on the dollar.  

Newsboy's picture

A beggar with a gun is no longer a beggar.

boogerbently's picture

We talked about this YEARS ago.

Once they allowed one country to do this, the floodgates would be open, and ALL the beggar nations would want their free money.

This is just another case of "Hear me now, believe me later"....

Harlequin001's picture

and if they don't print they default, and if they default poof goes your pension fund and then everyone who ever dreamt or actually did try to retire will sell their next biggest asset for liquidity, and then the entire retail housing market heads very swiftly in the general direction of the earth's core...

oh dear, never saw that one coming. Why not just print and be done with it?

Omen IV's picture

the core of the issue is not "allow" the default or discount but a recognition that the debt shouldnt have been extended to begin with

it is NOT the borrowers problem - loans are extended (provided) not by borrowers but by LENDERS - borrowers cannot "demand" someone extend them a loan - the lender does it out of his own free will

the reality is the lender wanted "fees" and created a "scheme"  and sold the loan because of the greater fool theory said they could find a home for the paper - the Fool!

fucking the lender is what belize should do - why? - because that what the banks do themselves to begin with - all belize is doing is picking up existing banking practices - when citi lies /falsifies about a syndication in its representations and Judge Rakoff calls them on it - it is prima facia what Belize should do as well

where is the logic not correct?


CheapBastard's picture

But...but...but my broker said 'Government Bonds are Safe...No chance of loss...... !!!'

He also told, "there's never been a better time then now to buy a house."

I should have known better then to buy Debt backed by more debt.....

At least he was nice enough to put me in a "balanced allocation" style investment to spread my roisk around:

25% Belize bonds;

25% Greek and Italian bonds;

25% FB, Zynga and Groupon

25% in California municipal bonds.

AynRandFan's picture

Very clever.  The comment writing here is superior.  Enjoying it.

Rogue Trooper's picture

Gee, this really got me thinking. It was so simple, are world bond, perhaps a New World Order Bond.  Fully backed by the UN. All 140 odd countries could borrow, just what they need for social harmony, fund grand projects to capture all our imaginations and other miscellaneous good works.  Of course an elite team of our intellectual betters would be necessary to make these judgements.

The 10 year would be -0.03455.  What could go possibly wrong and why has no one suggested it.

Someone call the squid or at least put up a facebook page... see how many likes this gets.

ZeroAvatar's picture

'......a New World Order Bond.'


That's it!  The obverse of the bond could feature a picture of the all-seeing browneye.

bobert's picture

We're going to discover the true price of interest if this trend continues.

AynRandFan's picture

Yup.  Zero.  Free interest, but partially guaranteed return.  Good enough?  Then I've got some Treasury bills for ya.

quantum dines's picture

You didn't default on that bond

holdbuysell's picture

The "You didn't..." meme has got to be the meme of the year.

AynRandFan's picture

Mom:  What happened here?

Kid:  I didn't do it.'s picture

You didn't make it the meme. Somebody else did that.

mammoth mo's picture

Well if you are giving stuff away......

fonzannoon's picture

I would not be looking at Greece to set any precedents. Maybe Iceland.

As for Federated, at least they have that money market fund....oh wait.....

AynRandFan's picture

Excellent point.  The smart debtor would default the most, the earliest, and drive a hard bargain.

If I were a Brit, which I'm not thank God, I'd say, "quite right".

Matt's picture

Other than the fact that Iceland didn't default on sovereign debt at all, but simply opted not to bailout their banks. Also, defaulting is great if you never plan on borrowing again, but probably not so good if you are planning to borrow immediatly afterwards.

Spitzer's picture

aregentina was back into the bond markett quite quickly

samcontrol's picture

bs, wtf are you talking about ? you mean Boden2012 that where restructured AGAIN, they will never pay.

Personally i got 33% three years later and put it into apple , you do the math. Some still have not seen a penny, and i.,m talking Paris Club here...

What i also learned is that 3-6. month after a default it,s a great time to buy EVERYTHING. Who wants to partner up and buy a mini resort in Belize?

samcontrol's picture

bs, wtf are you talking about ? you mean Boden2012 that where restructured AGAIN, they will never pay.

Personally i got 33% three years later and put it into apple , you do the math. Some still have not seen a penny, and i.,m talking Paris Club here...

What i also learned is that 3-6. month after a default it,s a great time to buy EVERYTHING. Who wants to partner up and buy a mini resort in Belize?

rayduh4life's picture

Uh Matt, how about a little dose of reality.  plenty of folks line up pretty quickly to loan to folks not long after a BK.  Iceland did the right thing by not bailing out their banks.  Where would Ireland be today if they had been Allowed to do the same?

jplotinus's picture

Cash-strapped Municipalities in the USA, take note.

reefermadness's picture

If you were dumb enough to buy Belize debt then you get a crewcut. It's a global debt crisis stupid.

Paul Atreides's picture

Anybody who buys sovereign debt is a slave trader.

Harlequin001's picture

Anybody who buys sovereign debt is a fucking idiot...

flacon's picture

A slave trading fucking idiot at that.

tmosley's picture

Yup, you are buying a slave with a couple of gatling guns instead of arms, and laser beam eyes.  Also, he's very lazy, and will force other people to do his work for him, if he can be bothered to force them to do it, and if they CAN do it, and if they are WILLING to do it.

flacon's picture

I wish more people spoke the truth like you just did. The sad thing is most people don't know that a bond = BONDAGE, and if they ever did make the mental connection they shrug it off as just coincidence that they are the same word.'s picture

Forgive me, I'm just a Daydream Belizer.

Theosebes Goodfellow's picture

OUCH! Stop it, Crokett, that one really hurt!

AynRandFan's picture

You get what you pay for.  I imagine that Belizean debt is very cheap, given the high interest rate.

Element's picture

It was Dubai World that kicked it off in Nov 2009 when they unilaterally 'recommended' a ten-year suspension in it's debt repayment schedule.

slewie the pi-rat's picture

a surreal spectacular!

did michaelJackson moving to one of the islands after his santaBarbara trial;  remember when he showed up @ the courthouse  late, in his pajamas with the umbrella so his nose wouldn't melt?  and told the damned judge he had a cold?   was that the time he got up on the limo? 

anyhow, dubai had that great indoor skislope and indoor snowmaking & snowstorm extravaganza

in fairness, lasVegas has had some pretty tough sledding also tho...

Dr. Engali's picture

Oh Belize as much as I enjoy seeing the bankers get screwed , didn't you learn anything from Ben? Just print a bunch of money and pay down the debt. Ben is going to screw you when he prints with your dollar peg . Beat him to the punch.

fonzannoon's picture

Is Belize on the USD? Why don't they just hike the price of their pina coladas? Those rich dudes will pay it.

Dr. Engali's picture

Belize has their own central bank. They can print at will. They keep their currency pegged with the U. S. dollar. I prefer a Margarita, Pina Coladas are disgusting in my book.