21 Mar

Mozambique to Face Off With Bondholders as Debt Talks Start

Mozambique is set to meet foreign creditors to discuss almost $2 billion of debt in London Tuesday in what will mark the start of formal restructuring negotiations, more than a year after the southern African nation defaulted.

Investors including Credit Suisse Group AG and UBS Group AG have little idea what will be discussed. Mozambique first missed coupon payments on its $727 million Eurobond due 2023 in January last year and has had almost no contact with the holders since then.

“We don’t really have any set expectations,” said Phillip Blackwood, managing director at EM Quest Ltd., which advises Sydbank A/S on its emerging-market assets, including Mozambican bonds. “There are many possibilities,” from Mozambique saying it can’t restart servicing external debts for several years to it resuming coupon payments, he said.

Blackwood will be among those attending a presentation by officials including Finance Minister Adriano Maleiane from 2 p.m. at the offices of law firm White & Case, which is advising Mozambique, the only country aside from Venezuela currently in default on a Eurobond.

Lazard Freres SAS, an investment bank also advising the government, has only said that creditors will be updated on recent fiscal and macroeconomic developments and will also hear “the key elements of debt-restructuring proposals.”

Despite the default, the bonds have soared, with money managers betting that Mozambique’s commencement of liquefied natural gas exports around 2023 will boost one of the world’s poorest economies.

The securities have made a price return — which excludes coupon payments — of almost 30 percent in the past year, the most among sovereign debt in emerging markets, according to data compiled by Bloomberg.

The Eurobonds fell for a third-day on Tuesday, trading 0.4 percent lower at 84.8 cents on the dollar.

The presentation comes after the International Monetary Fund’s debt sustainability analysis this month, which painted a bleak picture of Mozambique’s economy and finances, suggesting it may not be in a position to start paying investors again until LNG production begins.

To read the full article, click here.