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As expected, the government did not make its 18 January payment of $60 million on the $727 mn rescheduled Ematum bond. All payments on the $2 bn secret debt have now been stopped.
Bloomberg (17, 20 Jan) said: “Don’t expect Mozambican officials to back down in a stand-off with investors, even though it may be the first African nation to default on dollar bonds since 2011. As recently as last week, bondholders were convinced the nation would pay the almost $60 million bond coupon on schedule Jan. 18. Not only did the government on Monday say that’s not happening, it also signalled it won’t make payments in 2017.” Bloomberg sees the default as part of government’s strategy to compel bondholders to negotiate a restructuring, which they’ve so far resisted. The IMF resident representative in Maputo, Ari Aisen, said that, in effect, the government had told creditors at a meeting in London in November that it would stop paying. (O Pais Economico 20 Jan)
No deals are likely before mid-2017 at the earliest. Both donors and private creditors want negotiations to be concluded with the IMF first, and all three are waiting for the completion of the Kroll audit. That is due in February, but it is widely expected that Kroll will ask for a second three months. Kroll has been hired to audit the three security service controlled companies, Ematum, ProIndicus and MAM, that took the $2 bn loans. But much of the loan money was paid, highly unusually, not to the Mozambican companies that borrowed it, but to the Lebanese company that organised the deal, Privinvest. That company is highly unlikely to provide any information to Kroll, so it will be necessary to use information from the three Mozambicans companies as to how the money was used – and it is unclear how cooperative the companies and their masters, the security services SISE, are being.
The matter is further complicated because the IMF can only formally negotiate when it confirms Mozambique is at least on a path to sustainable debt, which in turn requires the private creditors to first renegotiate the $2 bn secret loans. But the private creditors won’t negotiate until there is an IMF deal. Mozambique is trying to break the logjam by forcing the private creditors to negotiate first.
The next payment is due on 21 March and is $119 mn on the ProIndicus loan. Unlike the Ematum loan, this is owed by the company rather than the government, and this is an important distinction, as explained below.
By Joseph HanlonSource: News reports & clippings
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