2023-Public-Sector-Perspectives

Transaction highlights • Largest debt for conservation swap ever , and first in the Americas • Innovative leveraging of ESG concerns to unlock value in sovereign restructuring context • Belize received necessary tender orders to repurchase its Superbond at steep 45% principal discount , delivering meaningful nominal debt reduction • Belize committed to protect 30% of its total ocean area • Belize committed to prefunding ~US$23.5 million into a conservation endowment , ensuring perennial conservation initiatives in Belize • Citi was the architect of the transaction’s structure, advising Belize, leading the dialogue with bondholders regarding the rationale and valuation of the offering, while concurrently negotiating with the parties involved in the TNC Impact loan Simplified transaction summary The Nature Conservancy (“TNC”) and Belize execute a debt for conservation swap involving the following steps: 1 TNC advances a USD loan to Belize, in exchange for conservation commitments (“Impact Loan”) 2 Belize uses the proceeds from the Impact Loan to tender the Super Bonds at 55% 3 Belize uses remaining proceeds to prefund ~US$23.5 mm Conservation Endowment 4 To monetize the Impact Loan, TNC issue Blue Bonds in public on market (“Loan”) “Blue Bond Financing” 5 TNC purchases i. political risk insurance from the US International Development Finance Corporation (“DFC”) covering the Impact Loan (“PRI Policy”) and ii. catastrophic risk insurance (“CAT Insurance”) 4 Financial & ESG Structuring Advisor for GoB Conservation Endowment Super Bond Holders Public Bond Market 1 2 3 4 5 ii. Bilateral swaps: The two parties involved in bilateral transactions are the creditor and debtor countries. When the swap is bilateral, the creditor government cancels debt owed by the debtor government in exchange for the debtor channeling the debt service savings toward funding strategic projects. For instance, in 2021 Egypt signed an agreement with the German Development Bank (KfW) to provide financing worth €41 million as part of the debt swap program for the Ministry of Education and Technical Education to implement the Comprehensive Technical Education Reform Initiative (TCTI). Moreover, Egypt and Italy have signed 20 deals for exchanging debts for development. The deals came as part of the third phase of an Egyptian-Italian debt swap for development program, worth US$100 million. 4 The CAT Insurance covers principal/interest due on the Impact Loan following an eligible natural disaster event (subject to availability). 72 Debt-For-Sustainability: Addressing Debt Pressures and Achieving SDG Goals