Mozambique Bonds Sink Most in Year as Restructuring Plan Snubbed..
MOZAMBIQUEs dollar bonds plummeted, losing the most in more than a year, after a key group of investors rejected restructuring proposals from the government, which said it would struggle to repay principal on its debts for the next decade.
Mozambique first missed coupons on the notes in January last year after donors cut aid and falling commodity prices dented its finances. At a meeting in London last week, the government proposed that investors in the Eurobonds and about $1.2 billion of state-guaranteed loans swap their holdings into new instruments with longer maturities and lower coupons, as well as accept some writedowns.
“We doubt bondholders will find this acceptable,” Stuart Culverhouse, London-based chief economist at Exotix Capital, which has a sell recommendation on the debt, said in a note Wednesday. “We estimate the proposal implies a present-value reduction of 45-55%. This is much higher than the 30-40% we estimated.”
The southern African nation’s $727 million of defaulted securities due in 2023 fell 6.1% to 78.1 cents on the dollar in London, extending their losses since Mozambique’s restructuring presentation on Tuesday 20 March to 8.3%. They’re now at their lowest since Nov. 13.
Government Proposal
The government gave holders of the Eurobonds and the loans to state companies ProIndicus and Mozambique Asset Management the following options for the new instruments, each of which would amortize in the final three years:
•A 16-year security with a coupon of 2% for the first 5-years, stepping up to 6%. There would be no haircut
•A 12-year maturity, a coupon of 1.5% for the first 5-years and one of 5% thereafter, and a 10% haircut
•An 8-year note with a 2.8% coupon throughout. Investors who choose this option would take a 20% write-down
Mozambican investors will be offered a local-currency instrument. Arrears on interest and principal have climbed to $636 million, of which $136 million was for the Eurobond, according to the presentation.
“A collaborative process is paramount to ensure Mozambique’s debt sustainability in the medium to long term,” it read.