Mozambique: State paying overdue invoices can improve economy - businesses
Hedge funds and some of the world’s biggest emerging-market bond investors are girding for a fight with Mozambique and its other creditors.
The country’s attempt to reach a restructuring agreement by the end of the year suffered a blow when a group of five investors, who hold 60 percent of its $727 million of Eurobonds, said the notes should be treated differently from loans to two state companies and talks couldn’t begin until an International Monetary Fund program was in place. Mozambique wanted to negotiate with creditors as one group, while the Washington-based lender has said a deal with the bond and loan holders should come first.
The move by the investors, who include Franklin Templeton and New York-based hedge fund Greylock Capital Management LLC, came two weeks after the government said it needed to restructure around $2 billion of foreign debt, including the Eurobonds, which were sold barely six months ago in a swap for more expensive debt owed by a state tuna-fishing business known as Ematum. Yields on the sovereign securities, due in January 2023, soared by more than 900 basis points to almost 25 percent and overtook Venezuela’s to become the highest in the world.
“It’s not the fault of bondholders and they shouldn’t expect any willingness by us to accept” writedowns, Lutz Roehmeyer, who helps oversee about $12 billion in assets at Landesbank Berlin Investment, including Mozambique’s Eurobonds, said by phone. “They should go into default on those loans to the state companies. There’s no need to pay the loans on time.”
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