Holders of Mozambican public debt prepare ‘war’ against restructuring

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Holders of Mozambican public debt prepare ‘war’ against restructuring

3:16 CAT | 14 Nov 2016

epa03582888 A broker looks at his screen on the trading floor of the Hong Kong Stock Exchange on the first day of trading in the Chinese lunar new year of the snake, Hong Kong, China, 14 February 2013. EPA/ALEX HOFFORD

Lusa (File photo)

Fund managers at some of the largest investors in emerging markets are bracing for a ‘battle’ against Mozambique and the country’s other creditors in the event of debt restructuring.

“It is not the fault of the debt holders and they should not expect any willingness on our part to accept losses,” says portfolio manager and chief financial analyst Lutz Roehmeyer, who oversees about US$12 billion in assets at Landesbank Berlin Investment, including some of the US$727 million of sovereign debt from Mozambique.

“They should default on these public companies, there is no need to repay the loans on time,” said the manager, referring to the debts of Proindicus and Mozambique Asset Management (MAM), which are guaranteed by the state.

The idea of Mozambique amalgamating public company and sovereign debt creditors into a single group with which it would be possible to jointly negotiate debt restructuring suffered a setback on Tuesday when a group of sovereign debt holders rejected not only the idea of restructuring the operation but also of being grouped in a joint financial operation.

In a statement released on Tuesday, five investors holding about 60 percent of the US$727 million in public debt securities that resulted from the conversion of Ematum’s [Mozambican Tuna Company] obligations in April said they would reject the proposal and the deadlines advocated by the finance minister at a presentation in London.

Debt holders also argued that any renegotiation could only begin after the international audit was completed and published and after the International Monetary Fund resumed an aid program.

Rates on Mozambique’s public debt have risen by almost 900 basis points to almost 25 percent, surpassing Venezuela in sovereign debt risk perceptions and becoming the highest interest rates in the world.

“They need to buy time,” said EM Quest managing director Phillip Blackwood, who helps Denmark’s Sydbank A/S manage US$2.5 billion in emerging market assets including Mozambique.

“Holders of sovereign debt are in a stronger position because they have already undergone restructuring, while the creditors of the loans [Proindicus and MAM’s] have not yet,” he added, concluding that “creditors really need to restructure loans and postpone payments, as the holders of ‘eurobonds’ have done. Mozambique also has to make some cuts in the budget. It cannot simply say that it no longer has the money”.

According to the head of the Africa Programme at Chatham House, Alex Vines, “Mozambique is at a very, very difficult stage”, because “the country is at the edge of the abyss. They have no money”.

Source: Lusa