Moody’s upholds Mozambique’s ‘junk’ rating

Login

Register

http://www.clubofmozambique.com/

Moody’s upholds Mozambique’s ‘junk’ rating

1:51 CAT | 14 Feb 2017

The rating agency Moody’s thinks that the failure to make the January repayment on sovereign debt constitutes financial ‘default’, and is maintaining its rating, which is compatible with losses.

In a note sent to investors yesterday, Moody’s says that the lack of payment at the end of the grace period which ended on Monday, “constitutes a sovereign financial default”.

At stake is the failure to pay the US$59.8 million January installment, the first due since the US$727.5 million debt was issued in April 2016.

“The default has no effect on the sovereign rating of Mozambique,” says Moody’s, explaining that “the Caa3 note and the ratings of maturing securities in 2023 are [already] consistent with the occurrence of financial defaults and losses of 20 to 35 percent expected on the original promises made to investors”.

The negative outlook, Moody’s adds, “indicates the risk that losses for private sector creditors will be greater after the government completes debt restructuring negotiations”.

Mozambique officially fell into default on February 3, after the grace period for the payment of US$60 million dollar January repayment of public debt issued made in April ended. The country thus becomes the first African country to miss a debt repayment since the Côte d’Ivoire was unable to honour its financial commitments in 2011.

The failure of the payment was confirmed by several analysts and holders of public debt securities to the Bloomberg financial information agency, and arises as the natural consequence of the announcement made by the Mozambican government itself, two days before the deadline, that it would not pay the nearly US$60 million that was owed to bondholders of the US$727.5 million worth of sovereign debt that Mozambique issued in April last year.

The Mozambican Finance Ministry confirmed on January 16 that it would not pay this month’s installment of US$ 59.7 million for sovereign debt maturing in 2023, thereby entering into default.

“The Ministry of Economy and Finance of the Republic of Mozambique wants to inform the holders of the US$ 726.5 million maturing in 2023 issued by the Republic that the payment of interest on the notes, worth US$ 59.7 million, which is due on January 18, will not be paid by the Republic,” the statement reads.

Source: Lusa