Dear PGM Capital Blog readers,
Belize, a Central American nation, today announced that they will miss a coupon payment on about US$544 million of bonds and is unlikely to pay creditors during a 30-day grace period that starts today:
The Central American nation, which owes investors about US$23 million today, can’t make the payment, Waight said in a phone interview from Belmopan City.
The government has been in talks with debt holders about a restructuring, its second since 2007.
“We simply do not have the capacity to make the payment,” Waight said. “We are hoping to engage with creditors as quickly as possible.”
Belize Financial Secretary, said investors have had enough warning that a restructuring was coming and added the terms presented are necessary to close the country’s budget gap.
Belize has hired the law firm Cleary Gottlieb to advise the government on the restructuring, Waight said. Cleary Gottlieb was the law firm, which assisted Argentina in its debt restructurings following the country’s default in 2001.
Credit rating Agency, Standard & Poor has a CCC+ rating on Belize, with negative outlook, while Moody’s has rated Belize debt as B3.
As you can see from below table these credit rating agencies consider Belize sovereign debt as Highly speculative with substancial risk.
| Moody’s | S&P | Fitch | ||||
|---|---|---|---|---|---|---|
| Long-term | Short-term | Long-term | Short-term | Long-term | Short-term | |
| Aaa | P-1 | AAA | A-1+ | AAA | F1+ | Prime |
| Aa1 | AA+ | AA+ | High grade | |||
| Aa2 | AA | AA | ||||
| Aa3 | AA- | AA- | ||||
| A1 | A+ | A-1 | A+ | F1 | Upper medium grade | |
| A2 | A | A | ||||
| A3 | P-2 | A- | A-2 | A- | F2 | |
| Baa1 | BBB+ | BBB+ | Lower medium grade | |||
| Baa2 | P-3 | BBB | A-3 | BBB | F3 | |
| Baa3 | BBB- | BBB- | ||||
| Ba1 | Not prime | BB+ | B | BB+ | B | Non-investment grade speculative |
| Ba2 | BB | BB | ||||
| Ba3 | BB- | BB- | ||||
| B1 | B+ | B+ | Highly speculative | |||
| B2 | B | B | ||||
| B3 | B- | B- | ||||
| Caa1 | CCC+ | C | CCC | C | Substantial risks | |
| Caa2 | CCC | Extremely speculative | ||||
| Caa3 | CCC- | In default with little prospect for recovery |
||||
| Ca | CC | |||||
| C | ||||||
| C | D | / | DDD | / | In default | |
| / | DD | |||||
| / | ||||||
The big question most investors are asking themselves is who’s next to default?
The lessons that investors must learn from these is to never invest in any country or debt security which is “Non Investmentgrade“.
Secondly, investors must be aware that we are approaching the bottom of the current “Kondratieff Winter” and the “Exter’s Pyramid“.
History has proven that in these bottom, credit dries up, default (risk) increase and gold will excel.
Another question investors might be asking them selves is.
Will we also be approaching the end of the Fiat Money system?
Due to this we advise investors and the middle class to exchange their paper or fiat-money for Real Money: Gold, Silver, and other precious metals.
Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Commodities, Precious metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.
Yours Sincerely,
Eric Panneflek
The problem we, as small nations, are confronted with is the growing difficulty of making both ends meet when the cost of public health and old age pension are going up due to demographic changes. If, on top of that, we are saddled with an inadequate, blundering, even corrupt government, the future really looks bleak. Who’s next is not a matter of fiat money, but rather of having the knowhow to deal with a problem that goes beyond the average high school student mind.