NAIROBI, May 28 (Reuters) , Ethiopia’s bid to restructure its $1 billion international bond hit another stumbling block on Thursday after bondholders rejected a revised offer that had been reworked to satisfy their bilateral counterparts.
The country’s finance ministry said a group of bondholders rejected the offer in formal talks, further delaying the long-running debt overhaul , a key test for the G20 Common Framework aimed at helping reduce the debt burden on poorer nations.
Etiyopya'nın 1 Milyar Dolarlık Borç Yeniden Yapılandırma Teklifi Neden Reddedildi?
The East African nation, which opted to rework its debt in 2021 and defaulted on its sole eurobond in 2023, struck a preliminary restructuring deal on the main financial terms with a group representing its bondholders in January.
Bilateral lenders, however, represented by the Official Creditor Committee co-chaired by France and China, said the deal did not meet the Comparability of Treatment principle, which mandates a borrower must seek similar debt relief terms from all its different creditors.
Resmi Alacaklılar Neden Borç Yapılandırma Anlaşmasının Gözden Geçirilmesini Talep Etti?
That led the government to revise its proposal, which was then approved by official creditors and presented to an ad hoc committee of bondholders at the latest round of talks, the ministry said.
“The ad hoc committee rejected the revised proposal, and the restricted period (for negotiations) was subsequently terminated,” it said.
The government added it will “assess all its available options to resolve the current situation, including a potential exchange offer or other market transaction relating to the 2024 Notes.”
The bond in question, which is dollar-denominated, traded broadly unchanged after the news of the failure of the talks, bidding at 104.75 cents on the dollar, Tradeweb data showed.
OFFICIAL CREDITORS FORCE REVISION OF BONDHOLDER DEAL
Etiyopya'nın Borç Yapılandırma Sürecinde Karşılaştığı Zorluklar Nelerdir?
The government in Addis Ababa formalised a restructuring deal with official creditors last July, paving the way for negotiations with bondholders, which led to the failed initial deal.
Under the January deal, bondholders would have taken a 15% writedown on the principal debt through an exchange for a new $850 million note maturing in mid-2029.
The agreement also envisaged the creation of a value recovery instrument (VRI) that would link payouts to the value of Ethiopia’s exports.
Contingent debt instruments, including VRIs, have become popular in recent years as a means to speed up restructurings and have been used in debt overhauls in Sri Lanka, Ukraine and Zambia.
The official creditors say Ethiopia’s improving economic fundamentals, including export earnings, would lead to divergent efforts between themselves and the bondholders to help get the country’s debt back onto a sustainable footing. The revised proposal does not include a VRI.
There was no immediate comment from the investor committee. The group includes Morgan Stanley Investment Management, Franklin Templeton and hedge funds VR Capital and Farallon.
The deadlock has further exposed the limits of the Common Framework process, debt issue campaigners say.
Launched in 2020, the framework was designed to bring different lenders to poorer countries under one roof , particularly China, whose lending surged in the decade before the pandemic.
It was regarded as a breakthrough but the length of the process for Ethiopia and the other main test cases, Zambia and Ghana, has led to complaints of delays and complexity from governments and creditors alike.
Kaynak: CNBC Africa