Mozambique restructures Irish-listed bonds in default

Financially-embattled African nation first reneged on the bonds’ terms in January 2017

Mozambique: the financially-embattled African nation has suffered catastrophic damage as a result of cyclones this year. Photograph: Tiago Petinga/EPA

Mozambique: the financially-embattled African nation has suffered catastrophic damage as a result of cyclones this year. Photograph: Tiago Petinga/EPA

 

Mozambique has reached a restructuring deal in principle with holders of $726.5 million (€649 million) of Irish-listed bonds, which went into default two years ago.

The financially-embattled African nation first reneged on the terms of the Dublin-listed bond January 2017 when it missed a $60 million interest payment. The debt had a maturity date of 2023.

While the group said last year that it would share future revenues from gas projects with holders of the bonds as part of a restructuring, it said in a statement published through Euronext Dublin on Friday that the creditors will no longer have access to such revenues.

Instead, the country will issue a $900 million bond maturing in 2031. It will pay a 5 per cent coupon, or interest rate, until 2023. After that, it will increase to 9 per cent.

Mozambique admitted in 2016 that it had guaranteed loans it had not disclosed. The revelation prompted foreign donors to cut off support, triggering a currency collapse and a default on its sovereign debt.

Euronext Dublin, formerly the Irish Stock Exchange, is the leading bourse worldwide for the listing of sovereign and corporate debt. Corporate defaults are far more common than sovereign ones.

Four creditors

Ratings agency Fitch, which has a restricted default rating on Mozambique, said last week that it anticipated the country’s government debt will increase to 99 per cent this year and 104.4 per cent in 2020 as it continues to run a large budget deficit.

Mozambique said in its statement that four creditors, which had agreed in principle to the restructuring, control about 60 per cent of the 2023 bonds. They are Farallon Capital Europe, Greylock Capital Management, Mangart Capital Advisors and Pharo Management.

Support from creditors holding 75 per cent of the bond will be needed to complete the restructuring. As a sweetener to get bondholders to sign up to the accord by September, Mozambique will also make a cash payment of up to $40 million.