The bonds of Mozambique’s tuna-fishing company plunged, sending yields to all-time highs, after a report from a state-owned news service that the government is seeking to rearrange the debt.
Yields on the $850 million of securities due September 2020 and backed by the Mozambique government soared 208 basis points, the biggest increase on record, to 9.52 percent.
Mozambique wants to extend the repayment period and negotiate lower interest rates, Agencia de Informacao de Mocambique reported, citing Minister of Economy and Finance Adrian Maleiane. Seven years is too short a time to repay the bonds, even with a two-year grace period, and interest charges are too high, the news service cited the minister as saying in a report published by the AllAfrica Global Media website.
The government is trying to reorganize the debt after a study showed that it has to bear $500 million of the costs related to the purchase of patrol boats and other equipment for the tuna company, known as Empresa Mocambicana de Atum SA, or Ematum, instead of $350 million that it had budgeted for.
Mozambique may want to delay making payments on the debt to give more time for income from natural-gas projects to ramp up, Stephen Bailey-Smith, head of Africa strategy at Standard Bank Group Ltd., said by phone on Friday from London.
“Further out, they’ll have more revenues from gas coming online. So, they may not think this is a particularly efficient use of their funds upfront,” said Bailey-Smith.
Mozambique has gas reserves that have the potential to vault the country into the top three producers of liquefied natural gas in the next decade, according to Anadarko Petroleum Corp., which plans to make a final investment decision about a project in the country by the end of this year.
A lack of clarity about the bonds is a source of “increasing volatility in the market,” said Victor Lopes, an African economist with Standard Chartered Plc, by e-mail from London. “At a macro level the fiscal picture is not bright in Mozambique and debt levels are among the highest in Africa.”