Next meeting with creditors scheduled for April – AIM report

Login

Register

http://www.clubofmozambique.com/

Next meeting with creditors scheduled for April – AIM report

12:16 CAT | 25 Mar 2018

Photo: Bloomberg

The next round of discussions between the Mozambican government and the country’s creditors will take place in mid-April, in Washington, when Finance Minister Adriano Maleiane attends the spring meetings of the International Monetary Fund (IMF) and the World Bank.

Thomas Laryea, of the British law firm Cooke Robothan, whch is the legal advisor to the Global Group of Mozambique Bondholders (GGBM), cited by the Reuters new agency, confirmed that the group would meet with Maleiane and his team on the sideline sof the IMF/World Bank meetings.

The GGBM represents the holders of what were once bonds issued by the Mozambique Tuna Company (Ematum). The bonds, for 850 million US dollars, were placed on the European bond market in 2013 by the banks Credit Suisse and VTB of Russia through their London offices.

The two banks deceived the bondholders. They did no proper due dilience on Ematum, which was a brand new company, set up by the Mozambican State Security and Intelligence Service (SISE), without the slightest prospect of ever becoming viable.

Two sister companies, Proindicus and MAM (Mozambique Asset Management), also took out huge loans from Credit Suisse and VTB, but these were not turned into bond issues. The total amount lent was just over two billion dollars. The loans were illicitly guaranteed by the previous Mozambican government, under President Armando Guebuza, violating both the 2013 and 2014 budget laws, and the Mozambican constitution, which states that such debt can only be authorised by the Mozambican parliament, the Assembly of the Republic.

In April 2016, the Mozambican government ratified a deal under which the EMATUM bonds were replaced by sovereign government bonds with a longer repayment time, but at a higher interest rate. These securities were rebaptised “MOZAM2023” bonds.

Because of the 2016 deal, the GGBM say they should be treated preferentially – a demand rejected by the Mozambican government, which insists on treating the ex-Ematum bonds, and the Proindicus and MAM loans in exactly the same way.

On Tuesday Maleiane met with the creditors in London and gave a bleak picture of Mozambique’s current economic situation. He told the creditors that there is no way they can be repaid any significant sums in the near future.

The three companies were never viable, and are effectively bankrupt – but the illegal guarantees issued under Guebuza means that the government becomes liable for the debt.

Maleiane offered the creditors three debt restructuring scenarios with repayment periods ranging from eight to 16 years. In the initial years, the creditors would receive small amounts of interest payment, but repayments of the principal would not begin until 2029, in scenario two, and 2033 in scenario one. In all cases, Mozambique wanted the creditors to take a “haircut” (i.e. a cancellation) of 50 per cent of the 636 million dollars of arrears in interest payments.

The GGBM feigned surprise. Unsurprisingly they rejected the government’s proposals and said they did not constitute a basis for discussions.

But Laryea has now told reporters, that the GGBM hopes “with the appropriate adjustments this initial step will lead to good faith discussions to reach an equitable and just solution”.

Asked if the creditors could reach an agreement with the Mozambican government if there was no prior agreement between Mozambique and the IMF, he simply replied “no comment”

In April 2016, the IMF suspended its programme with Mozambique precisely because of the scandal of the Ematum, Proindicus and MAM loans. One of the basic conditions for the resumption of an IMF programme, is a full audit of the three companies, which explains in detail what happened to the two billion dollars.

The London branch of the company Kroll Associates, reputedly the world’s foremost forensic auditors, was hired to carry out just such an independent audit, but the companies refused to cooperate. Indeed the SISE official who is chairman of all three companies, Antonio do Rosario, opened boasted that he had thrown the auditors out of his office. As a result the auditors found it impossible to account for all the money.

Source: AIM