Tuna bond prospectus details Mozambique debt levels

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Tuna bond prospectus details Mozambique debt levels

11:52 CAT | 23 Apr 2016

In File Club of Mozambique

Mozambique has detailed its foreign and domestic debt up to the end of the 2014 in a recent bond prospectus, the last available data, Reuters reported on Thursday (April 21).

In the document for a recent exchange, foreign central government total direct public and publicly-guaranteed debt was US$8.225bn as at 31 December 2014. Direct foreign debt was US$7.066bn.

The difference of US$1.159bn between the two is guaranteed debt. Mozambique does not break down the composition of that guaranteed debt.

The document also has a 2015 projection for foreign central government total direct public and publicly-guaranteed debt of US$9.637bn.

Controversy is growing over the sovereign’s disclosure of its financings, with the IMF suspending funding to the African nation after the multilateral said last week that Mozambique had failed to lay bare more than US$1bn of debt.

Marco Ruijer, portfolio manager at NN Investment Partners, said the news could lead to doubts about Mozambique’s ability to service its debt.

“If there is US$1bn extra and they do not get IMF money and donor aid isn’t coming to Mozambique, maybe there is a risk of default,” he said.

Earlier this month investors overwhelmingly backed a proposal to exchange bonds issued by state-owned tuna fishing company Ematum but guaranteed by the government into new sovereign bonds.

The exchange was undertaken to ease Mozambique’s debt burden with the amortising Ematum bonds swapped into longer-dated bullet notes. This means Mozambique will repay the entirety of the principal in one go when the notes mature.

The old bonds, which had US$697m outstanding, paid a 6.305% coupon and were due to mature in 2020. The new US$726m bonds have a 10.5% coupon and mature in 2023.

The Ematum bonds – Mozambique’s first foray into international capital markets – were mired in controversy after they were sold in 2013. Many investors thought the proceeds were being used solely to build a state-owned tuna fishing fleet, but a portion was used to bolster maritime security.

Credit Suisse and VTB Capital arranged the exchange.

Source: Reuters