Mozambique May Defaults on Eurobond Next Week, JPMorgan Says

MAPUTO (Capital Markets in Africa) – Mozambique is “highly unlikely” to pay a $60 million coupon on January 18, JPMorgan Chase & Co. said, sending the government’s Eurobond tumbling closer to an all-time low.

The $727 million of notes due in January 2023 fell 3.2 percent to 57.999 cents on the dollar as of 2:12 p.m. in London, trading less than 2 cents away from an all-time low. The yield rose 90 basis points to 24.05 percent.

The southern African nation is battling a financial crisis brought about by falling commodity revenue and the International Monetary Fund’s decision to cut aid last April after it discovered $1.4 billion of external loans the government had kept secret.

Mozambique said in October it needed to restructure $1.7 billion of debt, including the Eurobond, leading to a standoff with investors including Franklin Templeton Investment Management Limited (UK), AllianceBernstein LP, and New York-based hedge fund Greylock Capital Management LLC.

“The authorities’ rhetoric over the past three months implies they will refrain from making further payments” on the Eurobond “until some form of restructuring is agreed upon,” JPMorgan analysts Sonja Keller and Yvette Babb said in a note to clients on January 6.

Mozambique also probably won’t pay $141 million due on March 21 for a loan to Proindicus, a state-owned company, the analysts said. A default may cause rating companies to downgrade Mozambique.