Mozambique may convert a controversial $850 million bond issued two years ago by state tuna-fishing company Ematum into sovereign debt to improve terms, Finance Minister Adriano Maleiane said on Wednesday.
The bond was presented in 2013 as funding for “tuna fishing and related infrastructure” although it quickly became apparent much of the cash was for maritime surveillance and security.
Under pressure from Western donors, the government acknowledged the discrepancies in June when it assigned $500 million of the debt to its defence budget, leaving $350 million on the books of Ematum, the Portuguese abbreviation for Mozambican Tuna Company.
Mozambique currently guarantees all of the debt but Ematum is a considered by the state to be a corporate entity. Financial results published this year have shown the company falling well short of its revenue targets and posting losses.
“We need to clarify things. Currently the market is treating this like a sovereign debt but part of it is corporate debt,” Maleiane told Reuters.
“We will continue to guarantee the debt but it would be simpler if it was one loan,” he said, adding that packaging the debt into one sovereign loan could lower borrowing costs and extend the repayment period.
Under the original terms of the deal, Ematum agreed a yield of 8.50 percent for the seven-year bond, with a two year grace period. The bond has an amortising structure, giving it a weighted average life of 4.5 years.
Maleiane, a respected economist and former central bank governor, said Mozambique investment bank BNI was advising the government and Ematum on renegotiating the terms of the loan and would submit its recommendations by the end of November.
“We wait for BNI’s recommendation. What we want is better terms on the debt,” he said.
Mozambique made its first bond repayment of around $100 million last month, prompting the local metical currency to weaken against the dollar, banking sources said.
The opposition Renamo party has called for a parliamentary investigation into the bond, saying the issue and the sovereign guarantee were not debated in the chamber, as required by law.
“It’s a disgrace. We have no idea how we are going to get the revenue to pay back this money. It is a burden on our economy,” Renamo parliamentary leader Ivone Soares, niece of party leader Afonso Dhlakama, told Reuters.