Mozambique to Finally Restructure Eurobonds by End-September

MAPUTO (Capital Markets in Africa) – Mozambique plans to finally conclude restructuring its dollar bonds by the end of September, nearly three years after first announcing the proposal.

The southeast African nation has asked bondholders of $727 million of debt due 2023 to exchange it for $900 million of notes maturing five years later. That’s mainly because the government expects it will have started earning revenue from Africa’s largest liquefied natural gas project, and won’t have difficulty in repaying debts.

Mozambique needs to return to the international markets to raise funds for its participation in about $50 billion of planned natural gas projects that companies including Exxon Mobil Corp. plan to develop. Income from the gas could transform the economy of one of the world’s poorest countries.

“The restructuring of the notes will be an important milestone in Mozambique’s path to improving its relationship with the international financial community,” the government said in a statement Tuesday.

Gas Revenue
Interest rates will increase to 9% from 5% in 2023 when LNG production is expected to begin. Bondholders have until Sept. 6 to agree to the deal, despite a June court ruling that a sovereign guarantee on the loan that was later converted into Eurobonds was illegal, casting doubt on the proposed restructuring.

Owners of about 60% of the debt have already agreed in principle to the proposal. A threshold of 75% acceptance by bondholders is required for the deal to proceed. If successful, the transaction would close a chapter on restructuring of the Eurobonds under a plan that the government first announced in October 2016.

Uncertainty had earlier clouded the restructuring after a U.S. indictment in December said that projects, part of which the original loan was for, were a front to pay bankers, corporate executives and government officials at least $200 million in bribes. Some $2 billion of debt was used to finance the projects that involved purchasing a fleet of tuna-fishing boats.

Source: Bloomberg Business News