Mozambique's Yields Jump to Record After IMF Debt Discovery

  • Country didn't disclose around $1 billion of debt, says IMF
  • Yields on Eurobond due in 2023 rise to more than 14 percent

Mozambique’s Eurobond yields rose for a fifth day to a record after the International Monetary Fund said that the southern African nation hadn’t disclosed around $1 billion of debt.

Yields on $727 million of notes due in January 2023 climbed 16 basis points to 14.2 percent at 10:55 a.m. in London, having closed at 12.72 percent on April 14, the day before the IMF made its announcement. The bonds have lost 6.3 percent since peaking on April 13, a week after they were issued. That compares with an average gain of 0.3 percent for high-yielding emerging-market sovereign dollar bonds in that period, according to data compiled by Bloomberg.

“The price has dropped because of the news that there are even more loans outstanding,” Marco Ruijer, a money manager who oversees about $7 billion of emerging-market debt at NN Investment Partners, including Mozambique’s bonds, told reporters in London on Tuesday. “They didn’t announce those to the IMF before and that’s really a bad thing. Now the market is so shaky. All we can do is wait to see where the numbers are coming from.”

High Risk

Mozambique issued the interest-only bond, its first in a foreign currency, this month after swapping investors out of a $697 million amortizing note sold by a state-owned tuna-fishing company and due in September 2020. Holders of around 85 percent of the debt of Empresa Mocambicana de Atum SA, or Ematum, voted to accept the restructuring on April 1, after Mozambique, one of the world’s poorest countries, said it wanted to lower its annual debt-service costs by reducing principal payments over the next few years.

The IMF canceled a mission to Mozambique once it discovered the undisclosed bilateral loans. The country is at “high risk” of debt distress and may have to repay $119 million it borrowed as part of a $286 million emergency facility signed with the Washington lender last year, according to Anne Fruhauf, senior vice president at Teneo Intelligence.

“The undisclosed borrowing exceeds $1 billion and significantly changes our assessment of Mozambique’s macroeconomic outlook,” Antoinette Sayeh, head of the IMF’s Africa department, said at a press conference in Washington on April 15. “We are currently ascertaining in cooperation with the authorities the facts regarding this borrowing.”

Mozambique is facing a cash crunch as it grapples with a fall in prices of commodities such as coal. The metical’s 28 percent plunge against the dollar in the past year has also made it more expensive for the government to pay off its debt, about 80 percent of which is denominated in foreign currencies.

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