It was “difficult” for society to associate gas revenues with creditors, says Maleiane

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It was “difficult” for society to associate gas revenues with creditors, says Maleiane

1:19 CAT | 03 Jun 2019

Mozambique’s Minister of Economy and Finance, Adriano Maleiane, has said that the withdrawal of future natural gas revenues from the negotiation with creditors in the state’s ‘hidden debts’ matter was the result of social perception around the subject, Notícias reports today.

“The November agreement dealt with an instrument indexed to gas revenues. We have been renegotiating this because it is a new instrument and it is very difficult for society to perceive its inclusion,” Adriano Maleiane said about the new agreement announced on Friday.

“We were renegotiating and it was possible to withdraw this instrument,” he said.

Maleiane was speaking to reporters on Saturday in the city of Beira, on the sidelines of the international donors’ conference for post-cyclone reconstruction in Mozambique.

As compensation for the abandoning of explicit indexing of natural gas revenues, the interest rate to be paid was revised to “5% in the first five years and 9% thereafter”, lower than the 10.5% of the current bonds, which have fallen into default.

“Overall, we have a better debt service and that’s what we needed,” said th Finance minister.

The Mozambican government and the majority of holders of the state-owned company Ematum bonds expect the debt restructuring agreement to be implemented within three months.

Bondholders will be invited to exchange the current titles for a new series with maturity on September 15, 2031.

The value of the new issue is US$900 million and, according to the new agreement, no longer includes VRI (Value Recovery Instruments) indexed to future natural gas revenues of exploration areas 1 and 4 in northern Mozambique, foreseen in a first version of the agreement, announced last November.

Processing of natural gas be in the Rovuma basin is expected to start in 2022 and provide large revenues for the state.

In the understanding announced on Friday, an annual interest rate of 5% is proposed up to 15 September 2023 and 9% thereafter, until the maturity date, with half-yearly interest delivered on 15 March and 15 September each year, starting in 2020.

The new agreement provides for eight equal half-yearly instalments of US$112.5 million each, on March 15 and September 15, of 2028, 2029, 2030 and of 2031.

In addition to the new obligations, at the completion date of the restructuring, Mozambique will make a cash payment to eligible bondholders up to a total of US$40 million, consisting of a consent fee and an exchange payment.

Ematum’s current securities were to have matured in 2023 at a rate of 10.5%, but the state defaulted on payments.

Judicial investigations implicate the public tuna fishing company in the Mozambican state’s US$2.2 billion ‘hidden debts’ scandal, alongside other state-owned enterprises ProIndicus and MAM.

Source: Notícias