Mozambique proposes interest rate of 10.5% for new 2023 Ematum bond

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Mozambique proposes interest rate of 10.5% for new 2023 Ematum bond

11:59 CAT | 18 Mar 2016

In File Club of Mozambique / An Interceptor HSI32 from the Ematum fleet

Mozambique government-owned tuna fishing company Ematum has set an interest rate of 10.5% for a proposed new US dollar bond due 2023, according to an arranger, Reuters reports.

The company is asking investors to swap outstanding 2020 bonds that pay interest of 6.305% for the new notes as part of a distressed exchange. The cash price of the new bond will be 80 cents on the dollar. The exchange was announced on March 9.

According to Bloomberg, some of the biggest holders of Mozambique’s debt support the offer, betting the country’s gas riches will earn it enough cash in coming years to repay the debt.

While the coupon on the new debt will be 10.5 percent, up from 6.305 percent, the exchange will mean the country won’t have to make regular principal repayments, lowering its annual debt-service costs. The government believes that by 2023 it will have bolstered its finances through the development of recently discovered gas fields, which may turn it into the third-biggest liquefied natural gas exporter.

“That’s the basis for our original investment,” pointed out Marco Santamaria, who helps manage about US$25 billion in emerging-market debt at AllianceBernstein LP, speaking to Bloomberg by phone from New York. His firm is reportedly the biggest owner of Ematum securities. “We believe the country has very high potential and there’s plenty of reason to believe it will come to fruition by 2023. The terms that have been offered are reasonably attractive. I believe the offer will be approved.”

Mozambique needs 75% of investors to vote on the exchange – and 75% of those voting to agree – for the exchange to go ahead.

Credit Suisse and VTB Capital are dealer managers. The final deadline is March 29.

Source: Reuters / Bloomberg