Holders of Mozambique debt contemplate lawsuit

Login

Register

http://www.clubofmozambique.com/

Holders of Mozambique debt contemplate lawsuit

5:32 CAT | 10 May 2016

Some international holders of Mozambique sovereign debt securities are considering pursuing a lawsuit for compensation on the grounds that they did not receive full information concerning the country’s public debt.

According to Friday’s edition of the Financial Times, citing an informal group of investors who agreed to the bond swap of the Mozambican Tuna Company (Ematum) securities for Mozambican sovereign debt, legal consultations are currently underway to assess whether there is a possibility of going to court on the grounds of not having received all the relevant details on the country’s public debt.

“An informal group of investors says Mozambique and banks Credit Suisse and VTB did not provide them with sufficient information about the debt with government guarantee during the negotiations on the repurchase of bonds and exchange for new debt securities of government,” the Friday edition of the paper reads.

As the sovereign debt securities are quoted in Ireland, investors say that the parties may be required to pay compensation in accordance with Irish law if a court is satisfied that there was omission of information required by European Union law.

In the analysis of the paper’s journalists, “this dispute is the first result of a general increase of investment in emerging market debt that funnelled millions of dollars to countries with weak credit profiles, with investors seeking positive returns in a context of historically low interest rates in developed markets”.

The danger of investing in developing financial markets was the subject of an extensive FT article in March, when the issue of Ematum’s US$850 million ‘tuna bonds’ debt was the topic of the day.

The prospect sent to investors, published by Lusa in late April, had public debt at US$1.6 billion dollars, higher than the US$1.4 billion recognized domestically by the Mozambican government last week.

The amount, however, was not itemised, allowing loans of US$622 million to Proindicus and US$535 million to Mozambique Asset Management to remain undisclosed.

Credit Suisse declined to comment, while Russian investment bank VTB told the FT it does not believe “that there is any undisclosed conflict of interest”, and that there was “no material non-disclosure “.

Source: Lusa