Mozambican lessons from the lost commodity boom
The main adviser to the group of investors to whom Mozambique failed to make the January repayment instalment warned on Friday of the legal consequences of the default, saying it may include the obligation to pay the full amount in advance.
“Mozambique is now permanently on the record again for failing to repay debt,” Charles Blitzer told financial news agency Bloomberg, noting that “under the terms and conditions of the bonds, there are remedies for debenture holders, and the Committee reserves the right to pursue all such options.”
According to information sourced from market analysts by Lusa, the conditions for the issuance of sovereign debt allow changes under certain conditions to the initial contract, if they are subscribed to by more than 75 percent of the debt holders and also contain an ‘acceleration clause’.
This clause stipulates, in general terms, that debt holders may demand full payment of the amount invested, that is, US$727 million, if the issuer fails to meet financial obligations.
Mozambique officially fell into financial default on Friday, after its tolerance period to repay US$60 million the January installment of the public debt issued last April ending on Thursday. The African country thus becomes the first on the continent to fail to make a debt repayment since Ivory Coast was unable to honor its financial commitments in 2011.
The failure to pay has been confirmed to the Bloomberg financial information agency by several analysts and holders of public debt securities and comes as the natural consequence of the announcement by the Mozambique government itself, two days before deadline, that it would not pay almost US$60 million due to holders of US$27.5 million in sovereign debt issued by Mozambique in April of last year.
The Ministry of Finance confirmed on January 16 that it would not pay this month’s US$59.7 million installment on sovereign debt maturing in 2023, thereby defaulting.
“The Ministry of Economy and Finance of the Republic of Mozambique wants to inform the holders of the US$726.5 million maturing in 2023 issued by the Republic that the payment of interest on the notes, worth US$ 59.7 million, which is due on January 18, will not be paid by the Republic,” the statement reads.Source: Lusa
Alert: Bad weather in the South - Mozambique