Last week the government of Belize released three restructuring scenarios to the public. The sovereign's restructuring scenarios seem to be worse than some analysts had expected based on Belize's ability and willingness to pay. Thus US investment house Bear Stearns promptly downgraded their recommendation on Belize to underperform from outperform.

Bear Stearns' (Carl Ross') interpretation of the scenarios:
Scenario 1: 20% principal reduction, significant maturity extension (2024 final) with amortisation feature, significant coupon reduction in first 5 years (step-up feature).

Scenario 2: Same as scenario 1 with a bullet maturity in 2019.
Scenario 3: No principal haircut, significant maturity extension (2028 final) with amortisation feature, more severe coupon reduction than scenarios 1 and 2.

The problem with the scenarios, according to Bear, is that they are barely superior to the conditions offered by Grenada during that country's restructuring. However, Belize is in a much better situation than Grenada. In short, the belief is that Belize can afford to pay much more than they are willing to. One example put forward by Carl Ross is with respect to the fiscal accounts.

According to Ross "Using the government's projections, we calculate that the amount of fiscal resources available for servicing private sector debt, after honouring all obligations on domestic debt and official sector debt, is at least US$40 million per year. Yet, the interest burden under the government's proposed debt restructuring amounts to only US$10.2 million through 2009 and US$17.8 million from 2010 through 2011. By this calculation, the government could easily afford to double the early coupons, in our view."

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