Last week, we told you how Belize's participation in the Nature Conservancy's Blue Bonds for Ocean Conservation was making news all over the world. Among other positive views, the Blue Bond agreement with TNC is being referred to as "One of the biggest-ever debt restructurings meant to aid the environment."
That's because, as we told you, the restructuring of the Superbond's $553 million US dollar balance - which was due in 2034 - is being replaced by a 364 million US dollar Blue Bond. Over the course of 19 years, Belize will repay TNC, which then makes payments toward the bond issued by Credit Suisse.
It's a bit technical, but essentially, the Blue Bonds will replace the Superbond, and allow Belize to several hundred million dollars in debt servicing and debt relief. This morning, a representative of the Government of Belize and the TNC hosted a press conference, where we got to ask them all about the Blue Bond.
Chris Coye, the Finance Minister of State, revealed publicly that as of last Friday, the Superbond has been settled with the country's creditors. Here's what he had to say on the topic:
Hon. Chris Coye - Minister Of State, Ministry of Finance
"The Superbond noose no longer exists. That was canceled on Friday when the Superbond holders were paid off at a 45% discount."
Julie Robinson - Belize Program Director, TNC
"There are several agreements that are currently in place. The first is the Blue Loan Agreement. That was for the restructuring of the Superbond. So, the Superbond was 553 million. TNC came in and we provided the financing through Credit Suisse. So, Credit Suisse is the underwriter. In order to purchase back that debt at 45 cents a dollar. So, think of it as actually a 45% discount on that Superbond. So, that provided immediate debt reduction and savings to the Government of - and I'm using all US numbers here - of US 250 million dollars, straight off the bat. In addition to that - so this new loan agreement has a longer-term. So,
it's a 19-year term, and that plus lower coupon rates in the early years, and just the extended term gives an overall debt service savings of another 200 million US. In the first 5 years alone, it's going to be 50 million US that the Government is going to save as part of this new deal. So, that's the Blue Loan Agreement. And that is being done through a subsidiary of TNC. So, we set up another company that's called the Belize Blue Investment Company. So, they are the ones that purchased debt essentially through the Government."
Hon. Chris Coye - Minister Of State, Ministry of Finance
"What we're dealing with now is a Blue Bond, and for Belize, really, it's simple. We don't have many bondholders. We really only have one loan. We call it an impact loan, but it's the Blue loan agreement. Under that loan, there are different components that impact what would occur. With respect to the loan, in terms of getting an interest rate as low as we were able to get it, we had to get political risk insurance through the US Government's International Development Finance Cooperation. We also got parametric insurance in the event of a natural disaster, and there are other supporting - in effect - securities, where there is a debt service reserve account. I think it's a 10 million, roughly 10 million dollars debt service reserve account. And I believe that the TNC also backed with between 20 and 30 million worth of its own investments as well as 10 and a half million into the Belize Blue Investment company. All those were sufficient enough to bring down the risk level and ultimately the cost of financing to us was reduced accordingly. It also ensured that our rating on this Blue Bond was double A-2 by Moody's."
The press then asked the two members of the head table about Belize's new repayment commitments under the Blue Bond, when compared to the Superbond. Coye told us that the country will have to find far less money to pay annually when compared to the 50 million dollars per year under the retired Superbond:
Hon. Chris Coye - Minister Of State, Ministry of Finance
"I can't give you the absolute figures, but it is entirely based on the repayment terms - I think it's for the first 9 or 10 years - is interest only. For those first 9 years, the interest rate is on a step-up basis. So, it starts off at - I think - 3.2%. So, if you take 3.2% of 360 million, that's what you'll be paying in the first year. It's gonna be less than 20 million dollars Belize, whereas, we were paying over 50 million dollars on interest alone on the Superbond. So, right off the bat, in that first year, we're saving over 30 million dollars. And then, the second year, it's 3.7%, then it goes to 5.2%, and then settles off at around 5.95%. You calculate the interest off the principal amount, and that will give you what you'll be paying on a per-annum basis, quarterly. At the end of that 10 year period, we have 9 years to pay off the principal on an even basis. So, you split it, 9 into 360, that's 40 million a year, plus the interest that accrued on a per-annum basis, and that's what you're paying."
