Mozambique: Issuance of domestic debt financed settlement with banks in ‘hidden debts’ case – IMF

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Mozambique: Issuance of domestic debt financed settlement with banks in ‘hidden debts’ case – IMF

1:45 CAT | 25 Jan 2024

FILE - For illustration purposes only. [File photo: WWF]

Mozambique has paid US$142 million to financial institutions as part of an out-of-court settlement to end a dispute over the “hidden debts” in the London Commercial Court.

Information from the International Monetary Fund (IMF) consulted by Lusa recalls that “in an effort to reinforce governance and transparency and resolve costly disputes related to loans to public companies”, the Mozambican authorities “reached an extrajudicial agreement on part of the Proindicus debt in October 2023”.

“The settlement covers about $522 million of the outstanding principal and entails a cash component (US$46 million dollars) and issuance of domestic T-bonds (MZN 6.2 billion at 6-year maturity; equivalent to US$96 million),” reads the IMF report on the evaluation of the assistance program to Mozambique.

It adds that “the cash component was financed by a one-off fine collected by the government due to the cancellation of an LNG exploration project”, and that the treasury bonds issuance to finance the other component was carried out in 2023, being “consistent with the ceiling on domestic debt issuance under the 2023 budget law”.

Mozambique had previously announced that it paid US$130 million (€119.1 million) to financial institutions as part of the out-of-court settlement with Credit Suisse to end a legal dispute in the London Commercial Court over the “hidden debts” case.

According to documents presented that day in court, Mozambique paid amounts between one million dollars (€916,000) and 38.2 million dollars (€35 million) to eight institutions, including Banco Internacional de Moçambique (BIM), Banco Comercial and Investments (BCI), Moza Banco, United Bank for Africa, Atlantic Forfaitierungs and the investment funds VR Global Partners, Farallon Capital and ICE Canyon.

Made public on October 1st, the day before the start of the trial in British court, the agreement’s main signatories are the Mozambican government and the UBS group, owner of the Credit Suisse bank, main financier of the state company Proindicus to buy ships and maritime surveillance equipment in 2013.

The so-called Transaction Agreement signed between the Republic of Mozambique, the state company Proindicus, Credit Suisse and other litigants was approved by resolution of the Council of Ministers on June 6th, but only made official in the Supplement to the Republic Bulletin dated September 14th.

The lawyer representing the Mozambican Attorney General’s Office (PGR), Joe Smouha, indicated that Credit Suisse waived an outstanding debt of around US$450 million (€412 million), but that it would not pay any compensation to Mozambique.

The payments provided for by the extrajudicial agreement to the remaining financial institutions that entered into the Prodindicus syndicated loan or who had interests in the business varied in terms of proportion, depending on their status as litigants or not.

Left out of the extrajudicial agreement were the VTB bank, which was involved in financing Proindicus, and the Portuguese bank BCP, which only participated in the loan to the company MAM.

The ongoing London trial is the culmination of almost four years of litigation in the British courts, to which Mozambique appealed, alleging bribery, conspiracy to harm by unlawful means and dishonest assistance to write off debts and claim financial compensation worth millions of dollars.

Mozambique is demanding US$3.1 billion (€2.8 billion) in damages, compensation and indemnity from the shipping group Privinvest and its owner, Iskandar Safa, whom it accuses of paying bribes to public officials, including former finance minister Manuel Chang, who signed the sovereign guarantees on the loans.

Source: Lusa