Maleiane confirms agreement to restructure MAM debt; Proindicus sovereign guarantees to be withdrawn

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Maleiane confirms agreement to restructure MAM debt; Proindicus sovereign guarantees to be withdrawn

1:54 CAT | 22 Apr 2019

Photo: A Verdade

The Minister of Economy and Finance, Adriano Maleiane has told @Verdade that an agreement in principle to restructure the Mozambique Asset Management SA (MAM) debt of US$535 million has been reached.

MAM is one of the three companies that contracted loans with illegal Mozambican government sovereign guarantees between 2013 and 2014. @Verdade has however established that the government, in view of the corruption revealed by the US authorities, has told the International Monetary Fund (IMF) that it is to repudiate the sovereign guarantees in the case of Proindicus.

Minister Maleiane told @Verdade on Thursday (April 18) that: “With VTB and MAM we are at a level as we are with bondholders, there is an agreement in principle but also on the basis of what has now happened (case of corruption revealed by US courts allegedly involving former Minister Manuel Chang and other suspects formerly working at the Credit Suisse bank and the Privinvest Group) we are improving the model so that the state is not harmed.”

The US$535 million loan was contracted with Russian bank VTB Capital in 2014, with sovereign guarantees signed by the then-minister of finance Manuel Chang, but without the necessary approval of the Assembly of the Republic, and in violation of the Budget Law limit for that year.

Under the contract, which @Verdade has seen, capital amortisation should have started on May 23, 2016, and, had it been honoured, would have been completed on May 23 this year ( 2019) and, including interest, would have cost the company US$644,021,520.00 dollars.

Neither MAM nor the Mozambican government have ever made any repayments, so both are in default to the Russian bank, which by 2018 was owed US$188 million in interest alone, to which were added penalties of US$14 million.

Maleiane did not explain the restructuring model agreed upon but @Verdade knows that it will be similar to the agreement reached with Ematum bondholders, and consist of reducing to a sustainable amount the instalments of interest to be paid until 2023, payments thereafter being made from the long-anticipated Rovuma Basin natural gas revenues, totalling, by the mid-2030s, about US$1.5 billion.

Proindicus should enter into a normal bankruptcy

With respect to US$622 million loan contracted in 2013 by Proindicus SA to banks Credit Suisse and VTB Capital, of which the Nyusi government in 2016 amortised US$67,514,720 of principal and interest, Minister Maleiane told @Verdade that “it is clear that the justice organs [are] already in the process of withdrawal of the guarantee, but this is a matter of the Attorney General’s Office”.

The Zitamar News portal reports that the Mozambican government has told the IMF mission that visited the country that “it has no intention of supporting Proindicus, and that it should enter into a normal commercial bankruptcy proceedings”.

In support of the civil action filed by the Mozambican Public Prosecutor’s Office at the High Court of Justice Commercial Court of England and Wales, “against the banks, companies and managers involved in the contracting of loans”, the government expects to be able to repudiate the sovereign guarantees issued to Proindicus, a company former president Armando Guebuza said was “a Defence and Security Forces company, having as its main objective the protection of Mozambique’s Exclusive Economic Zone”.

Created on January 8, 2013, Proindicus was the first of the three state-owned companies to contract loans with illegal sovereign state guarantees. Proindicus is co-owned by the Ministry of National Defence, through its public limited company Monte Binga, and the Social Services of the Information Service and State Security (SISE), through GIPS (Management of Investments, Participations and Services, Limited).

The government’s position has already led the International Monetary Fund to withdraw Proindicus debt from its balance of total Mozambican public debt, which now represents 4.2 percent less in terms of gross domestic product, but is still unsustainable. In 2018, total public debt should be around 111.9 percent of GDP, falling back in 2019 to 118 percent, including National Hydrocarbons Company (ENH) borrowing.

FMI

Mozambique needs to make its Public Debt sustainable not only to be able to pay it, but mainly to be able to negotiate a new IMF Financial Program whose policies prevent it from “lending to a country whose debt is unsustainable,” as Ricardo Velloso recently explained in Maputo.

By Adérito Caldeira

Source: A Verdade