Mozambique debt deal may promote transparency in oil and gas revenue management – Standard Bank

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Mozambique debt deal may promote transparency in oil and gas revenue management – Standard Bank

1:37 CAT | 08 Nov 2018

In file CoM

Standard Bank believes that the Mozambican government’s agreement with some of its public debt creditors could promote transparency in the management of its future natural gas revenues.

Mozambique has announced that the agreement provides for payments through a financial instrument indexed to gas tax revenues.

“From a public policy perspective, these instruments [VRI] will probably have the effect of making the government transparent in regard to revenues generated by the gas sector,” reads a note from the bank’s Africa analysis team released on Wednesday, which Lusa has seen.

The agreement concerns bonds (‘eurobonds’) that represent about US$725 million out of a total of US$ 2 billion in hidden debts contracted by the Mozambican state between 2013 and 2014. About US$1.4 billion of loans related to public companies Proindicus and Mozambique Asset Management (MAM) still remains to be restructured.

In the same note, Standard Bank says that “an agreement to restructure these loans [to Proindicus and MAM] would ensure that this proposal [announced on Tuesday] is credible”.

The bank has argued in the past that “loan repayments [to MAM and Proindicus] were probably the primary reason for the government to default on all lenders”.

Mozambican ‘Eurobonds 2023’ debt securities rose more than 7% in the market on Tuesday, it adds.

On Tuesday, Mozambique announced an agreement in principle with 60% of the bond holders, under which the country resumes payments as early as March 2019 and delivers until 2033 a 5% share of the natural gas tax revenues expected to start flowing in 2022.

These securities represent about US$725 million of the total US$2 billion of debt illegally contracted in 2013 and 2014, and the only portion on which there is a preliminary agreement, still subject to several approvals.

The new bonds will have a face value of US$900 million, maturing on September 30, 2033 and with a coupon of 5.875%, lower than the current 10.5% on which Mozambique has been defaulting.

Source: Lusa