Mozambique: Restructuring agreement is important for credibility – EIU

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Mozambique: Restructuring agreement is important for credibility – EIU

3:13 CAT | 17 Sep 2019

in file CoM

The Economist Intelligence Unit (EIU) considers the Mozambican sovereign debt restructuring agreement an “important landmark for credibility” but warned that court cases on the loans may be a source of complications.

“Restructuring sovereign debt is an important milestone for enhancing Mozambique’s credibility with investors and allowing the National Hydrocarbon Company access to capital markets,” an analysis sent by EIU to investors on 9 September.

The experts from the economic analysis unit of the magazine The Economist however warn that “despite the ongoing restructuring process, the largest loans remain unresolved, and may complicate the complete normalisation of the relationship with creditors.”

Mozambican sovereign bond holders approved the restructuring of the US$726.5 million debt that originated with the public company Ematum, the government announced on 9 September.

“The proposal was approved by a written decision by the bondholders holding 99.5% of the aggregate value of the outstanding debt capital,” a statement from the Ministry of Economy and Finance reads, going on to indicate that the favourable vote “includes the Global Group of Bondholders of Mozambique”, which represents 68% of the bonds, and which had already declared support for the proposal, leaving to 75% of votes in favour of the restructuring and exceeding the necessary bar.

“The written resolution will be effective upon settlement conditions and it is expected that the initial distribution of the rights will take place on September 30, 2019,” the statement adds.

For the EIU, “Mozambique needs to return to international markets to raise funds for its participation in [the] gas projects” that promise to transform the country’s economy. In July, the government postponed raising US$3.2 billion, aimed at ensuring ENH’s participation in the US$20 billion project operated by Anadarko.

“Postponing debt issuance will help reduce risk and may result in better [borrowing] conditions,” the analysts postulate. “When the government begins to receive revenues from liquefied natural gas exploitation, it will be better able to pay off debt,” and will more easily accommodate higher interest rates.

The ‘hidden debts’ case is related to guarantees issued by the previous Mozambican executive for loans of about US$2.2 billion taken out by public companies Ematum, MAM and Proindicus.

Mozambican and US justice organs consider that part of the money was used to pay bribes to Mozambican and foreign citizens.

Source: Lusa