Mozambique proposes haircuts that bondholders swiftly reject – Bloomberg

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Mozambique proposes haircuts that bondholders swiftly reject – Bloomberg

7:52 CAT | 21 Mar 2018

File photo / Eurobonds fell the most more than a year after the talks

Mozambique proposed writing off some of its Eurobonds and other external debts as it began restructuring negotiations by saying it would struggle to repay principal for the next decade. A group of Eurobond holders rejected the proposals as a “total non-starter.”

The southern African nation told investors at a presentation in London Tuesday that “principal amortization” on its private external debts will be “limited” until 2028. Its ability to pay coupons and other interest will be “very low” through 2023, it said.

The government, represented by Finance Minister Adriano Maleiane, also wants to write off half its past-due interest payments and any penalties arising from them.

The so-called Global Group of Mozambique Bondholders, which says it has the support of investors who hold more than 80 percent of Mozambique’s Eurobonds, will meet the Finance Ministry and its advisers again tomorrow, and will “convey that this so-called proposal is a total non-starter,” Thomas Laryea, the group’s legal adviser said by telephone. The group will issue a statement giving reasons, he said.

Under the proposal, the government gave holders of its $727 million Eurobond due in 2023 and about $1.4 billion of state-guaranteed loans to ProIndicus and Mozambique Asset Management the option to swap into one of three instruments. The first would involve no haircut, have a 16-year maturity and a coupon of 2 percent for the first five years, stepping up to 6 percent. The second entails a 10 percent haircut, a 12-year maturity, a coupon of 1.5 percent for the first five years and one of 5 percent thereafter.

The final instrument would mature in eight years, involved a 20 percent haircut and give holders a 2.8 percent coupon throughout. All three instruments would amortize in the last three years.

The Eurobonds fell as much as 4.2 percent after the creditor meetings, the biggest drop in more than a year. The securities traded 2.4 percent lower at 84 cents on the dollar by 6:35 p.m. in London.

Mozambique and its investment-banking advisers at Lazard Freres SAS said that arrears on interest and principal had climbed to $636 million, of which $136 million was for the Eurobond.

“A collaborative process is paramount to ensure Mozambique’s debt sustainability in the medium to long term,” the presentation read.

Mozambique debt offer ‘a non-starter’, say creditors – Reuters

Mozambique: Government acknowledges $636M in unpaid debt

Source: Bloomberg