Bonds of Mozambique’s state-owned tuna-fishing company gained the most in 15 months after the nation proposed a debt-exchange for almost $700 million of securities as a commodities slump led to a cash crunch in the southeast African country.
Yields on the $773.5 million of sinkable securities fell 2.35 percentage points to 16.77 percent by 8:50 a.m. in London after dropping 173 basis points on Wednesday. That brought the price to 80.1 cents to the dollar, from 75 cents on Friday, according to data compiled by Bloomberg.
The maximum price of the new fixed-rate notes to exchange the securities of Empresa Mocambicana de Atum SA will be 80 cents on the dollar, the government said in a statement Wednesday. The new government bonds will mature in 2023. Other details about the terms of the debt exchange, including the prices and interest rate, will be announced on March 17. The debt outstanding is estimated to be $697 million after a scheduled interest-rate payment on March 11, the government said.
“The government so far is trying a friendly debt exchange,” said Lutz Roehmeyer, director of fund management at Landesbank Berlin Investment GmbH, who oversees about $1.1 billion in emerging-market debt, including the so-called tuna bonds. “So they can expect some goodwill from bondholders. If successful, the government has cash-flow savings.”
Mozambique, one of the world’s poorest countries, is struggling to pay its debt after a commodity slump reduced its export revenues and the depreciation of the metical boosted the payment costs in dollars. The International Monetary Fund agreed to give the country $286 million of emergency aid in October, while the central bank restricted how much Mozambicans could spend abroad on credit cards to bolster the currency.
Standard & Poor’s said Feb. 5 that it would view any restructuring that included an extension of maturity dates or a reduction in principal as tantamount to a default and may result in a downgrade in the country’s credit rating.
“Although we do not rate Ematum, such a determination could lead us to lower our ratings on Mozambique to SD,” it said. The company’s current rating on Mozambique’s long-term foreign debt is B-, six steps below investment grade. SD denotes that an obligor has selectively defaulted on a specific issue, but will continue to meet its payment obligations on other issues.