And while Fonseca lost the Ministry of Finance, he is still Belize's bondsman of choice. The Prime Minister stressed that he remains in charge of the troubled US$225 million bond offering, which is equivalent to 22% of the country's GDP. Despite successive downgrades from leading rating agencies and an aggressive badmouthing campaign led by Bears, Sterns and Company, Fonseca is determined to float the bond.
But, maybe more than determined, as we found out with the revelation of a startling document, he has to float that bond. 7NEWS obtained a copy of the due diligence report listing the debts that government hopes to retire with this bond offering. It is current up to this month, and shows that Belize has significant debts that are imminently due meaning that when Ralph Fonseca said he has a few balls in the air...he wasn't kidding.
Jules Vasquez Reporting,
This paper lists all the debt government wants to retires with the US$225 million bond offering. But you’ll be surprised to know what’s included. First the government borrowed US$81 million from the International Bank of Miami and still owes US$61million spread over four different loans. Two of those loans were taken on this year on an extremely short term for what’s described as “financing of general government activity.” They add up to US$46 million - that’s BZ$92 million that government needed to “finance its general activity.” Both these loans - nearly BZ$100 million - have to be repaid in just one year! In the case of the US $30 million which has a remaining balance of US$23 million, that has to be fully paid off by the end of this year.
Government is also deeply indebted to the Royal Bank of Trinidad and Tobago, called RBTT for DFC’s debts. How deep? Try US$120 million. And, remember the Schools Wide Area Network, those 5,000 computers in schools. Remember that we were told it was all free from Intelco in exchange for its 15 year exclusive contract with government?.... Well, apparently not. Government has a loan listed for US$1.45 million for the Schools Wide Area Network borrowed from Glen Godfrey’s bank to pay Glen Godfrey’s phone company, Intelco for a computer system we always thought was free.
Also notable is a US$1.9 million loan from Belize Estate and Company limited. Not a remarkable figure, but look at the interest rate, 24% which is almost three times the rate that government should borrow for and almost two times what you would pay if you walked into the bank and asked for a loan. Also interesting is this debt to KBC, a Belgian bank for BPL, which we take to be Belize Ports Limited, a private company. What’s government doing making loans for private companies? Well you tell us...
In all, the debt government hopes to retire with this bond adds up to $183,524,000. And how much will it cost to float the bond? Well, according to this document the “lead manager’s fee” will be US$2.8 million which, after all, is not too much money if they can help clean up this mess.
As is pointed out in a Bears Sterns report, some of the concerns about this bond offering in the international investor community is based on the fact that most of the previous US$225 million in bond offerings were to retire DFC debt which is still registered on this due diligence at US$120 million. The Bears Sterns report says "there are serious concerns about the status of the debt profile as investors had believed that the previous bond issues had termed out the vast majority of the government’s debt."