"Greece set a precedent for 'Here's what you're going to get, take it or leave it'" is how the WSJ summarizes [8] 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 [9] 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...
[10]
From the WSJ [8]:
...
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."