markets

Mozambique to Table Restructuring Plans After Default

Corrected
  • Talks come more than a year after government’s no-payment
  • Bondholders’ group started talks with Lazard in early December

Mozambique plans to meet holders of about $2 billion of its debt and outline restructuring proposals in London next month, more than a year after it defaulted, the Ministry of Economy and Finance said. Its Eurobonds gained to the highest since they were sold in April 2016.

“The presentation will provide to holders of the country’s direct and guaranteed external commercial indebtedness an update on recent fiscal and macroeconomic developments in Mozambique,” the ministry said Thursday in an emailed statement. The government will also present the key elements of debt-restructuring proposals, it said.

The state admitted to $1.4 billion of previously undisclosed loans in 2016, prompting the International Monetary Fund to withdraw financing and foreign donors to stop direct budget support. Mozambique said in October that year it couldn’t service its commercial loans and wanted to restructure them. The government hasn’t met its obligations on the debt since the start of 2017.

Authorities in the U.S., U.K. and Switzerland are investigating the deals Credit Suisse AG, VTB Capital Plc and Palomar Capital Advisors Ltd. arranged between 2013 and 2016. The companies have denied wrongdoing in arranging the money that went toward a tuna-fishing fleet, patrol boats, and ship-maintenance yards. None of the companies the funds went to are operational, and the tuna boats are rusting in the harbor of Maputo, Mozambique’s capital.

Advising Government

Lazard Freres SAS is advising the Mozambican authorities on the debt restructuring and London-based White & Case LLP are the legal advisers.

A group of owners of the Eurobonds started initial talks on the “process” of the planned restructuring at the start of December. The Global Group of Mozambique Bondholders’ advisers first now wants to meet the government’s advisers to “define the process and to discuss the debt-sustainability assumptions before we sit down in their planned March meeting,” Thomas Laryea, the bondholders’ legal adviser, said Thursday by phone.

The group has previously said restructuring the Eurobonds is unnecessary, as the government’s finances have improved sufficiently to resume interest payments. The advisers should first meet each other before the restructuring meeting to discuss fiscal and structural measures that Mozambique should implement over the medium term, Laryea said.

The bonds gained 2.8 percent, the most since June, to 86 cents on the dollar by the close of trade in London Thursday, the highest level since April 2016, the month they were sold. The debt’s value rose because the government has announced a date for the restructuring discussion, Luc D’Hooge, head of emerging-market bonds at Vontobel Asset Management AG in Zurich, said by email.

Mozambique initially planned on completing the restructuring process by January last year, it said in October 2016 when announcing it couldn’t afford to service its dollar debts.

(Corrects second paragraph after Advising Government subheadline to show that Laryea is the bondholders’ legal adviser.)
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